0450 7115 QP 1

Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

* 7 2 4 0 8 8 2 8 8 6 *
BUSINESS STUDIES 0450/12

Paper 1 February/March 2017
1 hour 30 minutes
Candidates answer on the Question Paper.
No Additional Materials are required.
READ THESE INSTRUCTIONS FIRST
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
Answer all questions.

The businesses described in this question paper are entirely fictitious.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
This document consists of 9 printed pages and 3 blank pages.
DC (KN) 134127/2
© UCLES 2017 [Turn over
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1 TXE is a large food retailer. The Finance Director is worried as last year profit fell by 10%. ‘I blame
competition and increased taxes. We have spent more on sales promotions, but these have not
been successful. We have to find ways to increase profits.’ TXE has 200 shops and plans to close
50 to lower costs. TXE may decide to sell a wider range of products, such as clothes, to help
increase its profits.
(a) Identify two ways to measure the size of a business.
Way 1: .......................................................................................................................................
Way 2: ...................................................................................................................................[2]
(b) Identify two reasons why a Government might increase taxes.
Reason 1: .................................................................................................................................
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Reason 2: .................................................................................................................................
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(c) Identify and explain two possible reasons why sales promotions might not have been
successful for TXE.
Reason 1: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
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Explanation: ..............................................................................................................................
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(d) Identify and explain two factors TXE should consider when deciding which shops to close.
Factor 1: ...................................................................................................................................
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Explanation: ..............................................................................................................................
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Factor 2: ...................................................................................................................................
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Explanation: ..............................................................................................................................
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(e) Do you think TXE should sell a wider range of products? Justify your answer.
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2 QAC uses batch production to make 70 different cleaning products including soap and polish. To
meet increased demand for two of its products, X and Y, QAC could invest $10m in flow production
using new technology. The Finance Director is worried about QAC’s cash flow position as shown
in Table 1. He thinks it is important to have a high level of inventory but he also wants to improve
the cash flow position.
Table 1: QAC’s cash flow forecast for April – June 2017 ($000)
April May June

Cash in: 300 400 460
Cash out:
Labour costs 140 140 140
Inventory costs 120 180 180
Fixed costs 100 100 100
Total cash out 360 420 420
Net cash flow (60) (20) ?
Opening balance 30 (30) (50)
Closing balance (30) (50) ?
(a) What is meant by ‘batch production’?
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(b) Calculate the following values in June.
Net cash flow: ...........................................................................................................................
Closing balance: ...................................................................................................................[2]
(c) Identify and explain two advantages to QAC of having a high level of inventory.
Advantage 1: ............................................................................................................................
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Explanation: ..............................................................................................................................
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Advantage 2: ............................................................................................................................
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Explanation: ..............................................................................................................................
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(d) Identify and explain two ways (other than reducing inventory) that QAC could use to improve
its cash flow position.
Way 1: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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Way 2: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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(e) Do you think QAC should change its method of production? Justify your answer.
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3 Dipta and Ravi are friends. They want to start up a business making chocolates to sell at local
markets. Most ingredients such as cocoa beans will be imported. Ravi’s primary market research
shows that using ethical sources of supply for the ingredients will be popular with consumers. Ravi
and Dipta have no business experience, but Dipta has written a business plan. They need $500
for equipment, but they cannot decide which source of finance to use.
(a) What is meant by a ‘business plan’?
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(b) Identify two possible methods of primary market research that Ravi might have used.
Method 1: ..................................................................................................................................
Method 2: ..............................................................................................................................[2]
(c) Identify and explain two benefits to Dipta and Ravi of acting in an ethical way.
Benefit 1: ..................................................................................................................................
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Explanation: ..............................................................................................................................
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Benefit 2: ..................................................................................................................................
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Explanation: ..............................................................................................................................
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(d) Identify and explain two possible advantages of importing for Dipta and Ravi’s business.
Advantage 1: ............................................................................................................................
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Explanation: ..............................................................................................................................
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Advantage 2: ............................................................................................................................
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Explanation: ..............................................................................................................................
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(e) Explain two sources of finance Dipta and Ravi could use. Recommend which source Dipta
and Ravi should choose. Justify your answer.
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4 BGN sells furniture such as beds and tables. It started as a partnership but is now a private limited
company. BGN has expanded quickly and has 10 shops located in different cities. Each shop
manager is responsible for recruitment and decisions about inventory levels. They send the Board
a monthly report. The Managing Director has a laissez-faire leadership style. There has been
an increase in customer complaints and employees think internal communications need to be
improved.
(a) Identify two stages in recruitment.
Stage 1: ....................................................................................................................................
Stage 2: ................................................................................................................................[2]
(b) Identify two possible reasons why the owners of a business may want it to expand.
Reason 1: .................................................................................................................................
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Reason 2: .................................................................................................................................
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(c) Identify and explain two advantages to BGN of being a private limited company.
Advantage 1: ............................................................................................................................
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Explanation: ..............................................................................................................................
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Advantage 2: ............................................................................................................................
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Explanation: ..............................................................................................................................
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(d) Identify and explain one advantage and one disadvantage of the Managing Director’s
leadership style.
Advantage: ...............................................................................................................................
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Explanation: ..............................................................................................................................
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Disadvantage: ...........................................................................................................................
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Explanation: ..............................................................................................................................
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(e) Explain two ways BGN could try to improve internal communication. Recommend which way
BGN should choose. Justify your answer.
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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
© UCLES 2017 0450/12/F/M/17

*8011414016*

1 hour 30 minutes


This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
03_0450_12_2018_1.15
2
1 Ruby is a sole trader. She produces handmade, individually designed greetings cards using job
production. High quality cards are important to Ruby’s customers. Ruby has 3 part-time employees
who are paid an hourly wage rate. Ruby is thinking of changing from an hourly wage rate to a piece
rate system, where the employees are paid depending on the quantity of products they make. Ruby
thinks this will help to improve the motivation of her workforce. During festivals and celebrations
she receives a higher number of orders.
(a) What is meant by ‘motivation’?
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(b) Identify two disadvantages to Ruby of using job production.
Disadvantage 1:.................................................................................................................
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Disadvantage 2:.................................................................................................................
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(c) Identify and explain two advantages to Ruby of having part-time employees.
Advantage 1:.....................................................................................................................
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Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two non-financial methods of motivation which Ruby could use.
Method 1:...........................................................................................................................
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Explanation:.......................................................................................................................
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Method 2:...........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think Ruby should change the payment method she uses for her employees? Justify
your answer.
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2 Paul is the Managing Director of a private limited company called PShirts. It manufactures and sells
men’s and women’s shirts in country Y. Its products are priced lower than most of its competitors.
Sales have fallen recently even though there has been an economic boom. Paul is thinking about
starting to sell shirts in other countries. One of the directors is worried about legal controls in other
countries. A summary of the accounts is shown in Table 1.
Table 1: Summary of financial statements
2016 ($m) 2017 ($m)
Revenue 500 350
Gross profit 210 120
Profit 160 60
Current assets 35 30
Current liabilities 15 15
(a) Identify two features of an economic boom.
Feature 1:..........................................................................................................................
Feature 2:.......................................................................................................................... [2]
(b) Calculate the current ratio in 2017.
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(c) Identify and explain two disadvantages to PShirts of being a private limited company.
Disadvantage 1:.................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage 2:.................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two benefits to PShirts of selling in other countries.
Benefit 1:...........................................................................................................................
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Explanation:.......................................................................................................................
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Benefit 2:...........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think Paul should be worried about the change in the profit margins between 2016 and
2017? Justify your answer.
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3 STC manufactures toothpaste for the mass market. STC’s products have price elastic demand as
there is a high level of competition in this market. STC uses a competitive pricing strategy (method).
The marketing manager is thinking of changing this pricing strategy to increase sales (see Table
2). The head office of STC is located in country X, but the factory is in country Y. There have been
complaints about communication issues between the managers and workers. STC has continued
to grow but the managers still have a laissez-faire leadership style.
Table 2: Forecast effect of changing price
Forecast quantity
Current price Quantity demanded Planned new price
demanded
$2.00 100 000 per month $1.50 150 000 per month
(a) What is meant by ‘mass market’?
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(b) What is meant by ‘price elastic demand’?
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(c) Identify and explain two disadvantages to STC of business growth.
Disadvantage 1:.................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage 2:.................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two ways STC could improve communication between managers and
workers.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think STC should change its pricing strategy? Justify your answer.
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4 MSH is a large business providing floor cleaning services to other businesses. It has many loyal
employees. When a worker does leave, new recruits are trained using on-the-job training. MSH is
located in an area with a high level of unemployment. MSH is experiencing falling demand and
plans to increase promotion. The manager of MSH is thinking about relocating the business to Main
city, which is 50 km away. Main city has many expanding industrial areas. The manager is worried
about the effect of relocation on some stakeholder groups.
(a) What is meant by ‘stakeholder group’?
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(b) What is meant by ‘on-the-job training’?
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(c) Identify and explain one advantage and one disadvantage to MSH of using on-the-job training.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two ways MSH could promote its services.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think MSH should relocate its business? Justify your answer.
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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
© UCLES 2018 03_0450_12_2018_1.15

Cambridge Assessment International Education
*9988984949*

1 hour 30 minutes

Write your centre number, candidate number and name in the spaces at the top of this page.

This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
03_0450_12_2019_1.16
2
1 Anna and James have formed a business partnership. They own an ice cream shop on the main
street in Capital city. The shop has 3 part-time employees and sells high quality ice cream to a
niche market. Anna and James gain feedback by asking customers to complete questionnaires.
Customers do not like the long queues and poor customer service. Anna thinks these problems
are caused by the shop always being busy. James has suggested moving to a larger shop in a
different location in Capital city.
(a) What is meant by ‘niche market’?
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(b) Identify two disadvantages to a business of having part-time employees.
Disadvantage 1: ................................................................................................................
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Disadvantage 2: ................................................................................................................
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(c) Identify and explain two possible reasons why Anna and James formed a business partnership.
Reason 1: .........................................................................................................................
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Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain one advantage and one disadvantage to Anna and James’s business of
asking customers to complete questionnaires.
Advantage: .......................................................................................................................
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Explanation: ......................................................................................................................
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Disadvantage: ...................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think Anna and James should move to a larger shop? Justify your answer.
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2 GXC produces car components in country X using imported raw materials. This year, GXC has
invested in new machinery. This has resulted in the redundancy of 100 employees, 30% of its
workforce. Some stakeholder groups were unhappy about this decision. GXC uses flow production
and benefits from economies of scale. It sells the components to car manufacturers based in country
Y. The exchange rate of country X’s currency has recently appreciated. GXC’s Managing Director
is worried about this.
(a) Identify two economies of scale.
Example 1: ........................................................................................................................
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Example 2: ........................................................................................................................
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(b) What is meant by ‘redundancy’?
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(c) Identify and explain one advantage and one disadvantage to GXC of using flow production.
Advantage: .......................................................................................................................
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Explanation: ......................................................................................................................
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Disadvantage: ...................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two stakeholder groups that could be affected by GXC’s decision to invest
in new machinery.
Stakeholder group 1: ........................................................................................................
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Explanation: ......................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think GXC’s Managing Director should be worried about the recent appreciation of the
exchange rate of country X’s currency?
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3 Sachin’s business manufactures cricket bats for the mass market. He advertises in a national
newspaper every two weeks. Demand for the cricket bats has rapidly increased since the business
started two years ago. His 30 employees now produce 3 million cricket bats per year. A summary
of costs and selling price is shown in Table 1. Sachin is finding it difficult to manage the business
on his own. His friend has suggested delegating some tasks, such as marketing and production
decisions, to employees.
Table 1: Summary of costs and selling price ($)
Fixed costs per year ($) 200 000
Variable cost per unit ($) 4
Price per unit ($) 20
(a) Calculate the total cost of producing 3 million cricket bats.
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(b) What is meant by ‘variable cost’?
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(c) Identify and explain one advantage and one disadvantage to Sachin’s business of advertising
in a national newspaper.
Advantage: .......................................................................................................................
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Explanation: ......................................................................................................................
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Disadvantage: ...................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two advantages to Sachin’s business of selling to the mass market.
Advantage 1: ....................................................................................................................
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Explanation: ......................................................................................................................
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Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think Sachin should delegate some tasks to employees? Justify your answer.
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4 DGC is a public limited company. It has a reputation for selling high quality branded clothes and
shoes to women. It is a multinational company and owns shops in 10 countries. Each shop operates
with a short chain of command between the shop manager and sales employees. DGC is planning
to expand into country Z for the first time. DGC has carried out some secondary market research
and has found that country Z has different cultural and social trends to its existing markets. The
Managing Director thinks DGC should open the shops in country Z as a franchise. However, the
Finance Director thinks DGC should buy its own shops using a suitable source of finance.
(a) Identify two methods of secondary market research.
Method 1: ..........................................................................................................................
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Method 2: ..........................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘chain of command’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to DGC of being a multinational company.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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9
(d) Identify and explain two factors that DGC should consider when choosing a source of finance
for expansion.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think DGC should open shops in country Z as a franchise? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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© UCLES 2019 03_0450_12_2019_1.16

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To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment
International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge
© UCLES 2019 03_0450_12_2019_1.16

™
Cambridge IGCSE

*6148412007*
Paper 1 Short Answer and Data Response February/March 2020

1 hour 30 minutes
You must answer on the question paper.
No additional materials are needed.
INSTRUCTIONS
• Answer all questions.
• Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
• Write your name, centre number and candidate number in the boxes at the top of the page.
• Write your answer to each question in the space provided.
• Do not use an erasable pen or correction fluid.
• Do not write on any bar codes.
• You may use a calculator.
INFORMATION
• The total mark for this paper is 80.
• The number of marks for each question or part question is shown in brackets [ ].
This document has 12 pages. Blank pages are indicated.
03_0450_12_2020_1.24
2
1 HSN uses batch production to make breakfast cereals. The products are sold using several
distribution channels. HSN employs 600 production workers. HSN has problems with many
employees leaving. Following the dismissal of the Operations Manager, the Human Resources
Director has to recruit a new manager. She said: ‘The person must have good communication skills
to help solve the communication barriers HSN has with employees.’ The Human Resources Director
has to decide whether to use internal recruitment or external recruitment for the new manager.
(a) Define ‘dismissal’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two distribution channels a business might use.
Distribution channel 1: ......................................................................................................
...........................................................................................................................................
Distribution channel 2: ......................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible problems to HSN of many employees leaving.
Problem 1: ........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 03_0450_12_2020_1.24

3
(d) Explain how each of the following could cause communication barriers within HSN.
Language: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Medium of communication: ...............................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think external recruitment is better than internal recruitment when recruiting a new
manager for a large business? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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2 Gomez is a sole trader. He provides painting and decorating services to business customers. His
business does not benefit from any economies of scale because it is small. Gomez has to pay his
suppliers within 1 month. However, he gives customers 3 months to pay. Gomez uses an old van
he has borrowed from his father to travel to his customers’ offices and shops. As the van often
breaks down, Gomez is thinking of buying a new van. A cash-flow forecast for the next 3 months
is shown in Table 2.1.
Table 2.1
Cash-flow forecast for Gomez’s business ($)
April May June
Cash in 3 000 2 800 2 600
Cash out 2 600 3 000 Y
Net cash flow X (200) 200
Opening balance 200 600 400
Closing balance 600 400 600
(a) Define ‘economies of scale’.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate X and Y.
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
© UCLES 2020 03_0450_12_2020_1.24

5
(c) Outline two factors Gomez should consider when choosing a source of finance for the new
van.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Explain one advantage and one disadvantage to Gomez of being a sole trader.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 03_0450_12_2020_1.24 [Turn over

6
(e) Do you think asking customers to pay more quickly is the best way for a small business to
improve its cash-flow? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 03_0450_12_2020_1.24

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3 Globalisation has changed the way many businesses operate. VKW makes cell (mobile) phones.
It uses just-in-time inventory control. VKW exports 40% of its products. It imports most of its raw
materials to help reduce total costs. All 800 of VKW’s employees understand the importance of
quality assurance. The Operations Director has asked all suppliers to ensure they do not use child
labour. She is also concerned that many governments are planning to increase import controls
such as quotas.
(a) Define ‘globalisation’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two advantages to a business of using quality assurance.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways VKW might be affected by increased import controls.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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(d) Explain one advantage and one disadvantage to VKW of using just-in-time inventory control.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that businesses should be concerned about ethical issues such as child labour?
Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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4 WFG is a private limited company in country X. It owns 120 supermarkets, of which 20 are operated
as franchises. One of WFG’s objectives is to expand by opening 30 more shops in the next 18
months. The Managing Director said: ‘Market research shows that fewer people are going to the
local markets every day to buy their food. It is important for us to set prices at the right level.’ The
Managing Director is thinking about whether to introduce new technology into the business.
(a) Define ‘market research’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two objectives (other than expansion) a business might have.
Objective 1:........................................................................................................................
...........................................................................................................................................
Objective 2:........................................................................................................................
........................................................................................................................................... [2]
(c) State four factors a business should consider when deciding the price of a product.
Factor 1:............................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Factor 3:............................................................................................................................
...........................................................................................................................................
Factor 4:............................................................................................................................
........................................................................................................................................... [4]
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(d) Explain two factors WFG should consider when deciding whether to introduce new technology
into its business.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think selling franchises is a better way for a retail business to expand than opening
more of its own shops? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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© UCLES 2020 03_0450_12_2020_1.24

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Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
© UCLES 2020 03_0450_12_2020_1.24

™
Cambridge IGCSE

*7620510515*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
This document has 12 pages. Any blank pages are indicated.
03_0450_12_2021_1.17
2
1 RJJ manufactures women’s shoes. It sells the shoes to a niche market using e-commerce. RJJ is
a public limited company and its shareholders benefit from limited liability. The Managing Director
is planning to expand the business. RJJ could take over a competitor. Last year profit decreased
by $50 000. The Finance Director has to decide on a source of finance to fund the expansion.
(a) Define ‘limited liability’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘niche market’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two opportunities for consumers of using e-commerce when purchasing RJJ’s products.
Opportunity 1: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Opportunity 2: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 03_0450_12_2021_1.17

3
(d) Explain two factors RJJ’s Finance Director should consider when deciding on a source of
finance for the expansion.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a takeover of a competitor is the best way for a large business to grow? Justify
your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 03_0450_12_2021_1.17 [Turn over
4
2 ABA provides short-distance flights between 60 countries. It is a multinational company based in

country X. ABA uses market segmentation when deciding on its pricing method. The marketing
department is carrying out market research to gain feedback on customer experiences. ABA is
considering ways in which it can contribute to sustainable development.
(a) Define ‘market segmentation’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two pricing methods.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two factors which could affect the accuracy of ABA’s market research.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 03_0450_12_2021_1.17

5
(d) Explain two benefits to ABA of being a multinational company.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think using renewable energy is the best way for a tertiary sector business to contribute
to sustainable development? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 03_0450_12_2021_1.17 [Turn over

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3 SMR produces snack food using batch production. The snacks are sold to people watching sporting
events in city Y. SMR pays bonuses to motivate its 3 part-time employees. SMR has received
complaints from customers about the quality of the snacks. The business has forecast cash-flow
problems in the coming months. An extract from this cash-flow forecast is found in Table 3.1.
Table 3.1
Extract from SMR’s cash-flow forecast ($)
April May June
Total inflows 1000 900 900
Total outflows 1400 1400 1300
Net cash flow (400) (500) Y
Opening balance 100 X (800)
Closing balance (300) (800) (1200)
(a) Calculate the values of X and Y.
X: ......................................................................................................................................
...........................................................................................................................................
Y: ......................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘batch production’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
© UCLES 2021 03_0450_12_2021_1.17

7
(c) Identify four methods a business could use to ensure the quality of its products.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Method 3: ..........................................................................................................................
...........................................................................................................................................
Method 4: ..........................................................................................................................
........................................................................................................................................... [4]
(d) Explain two ways SMR could overcome its cash-flow problems.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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(e) Do you think paying bonuses is the best way to motivate employees in a small business?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 03_0450_12_2021_1.17

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4 SCT is a small business that manufactures handmade tables. SCT has 50 trained employees. The
Operations Manager uses an autocratic leadership style when making decisions. Some of SCT’s
employees are demotivated and the business has a high rate of labour turnover. SCT is planning
to relocate to a new factory in the same country.
(a) Identify two ways of measuring the size of a business.
Way 1: ...............................................................................................................................
Way 2: ............................................................................................................................... [2]
(b) Identify two methods of training employees.
Method 1: ..........................................................................................................................
Method 2: .......................................................................................................................... [2]
(c) Outline two effects of a high rate of labour turnover to SCT.
Effect 1: .............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Effect 2: .............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 03_0450_12_2021_1.17 [Turn over

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(d) Explain two factors SCT should consider when deciding on the location of a new factory in
the same country.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think autocratic leadership is the best style for a small business to use? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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© UCLES 2021 03_0450_12_2021_1.17

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© UCLES 2021 03_0450_12_2021_1.17

™
Cambridge IGCSE

*7067409899*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
03_0450_12_2022_1.19
2
1 CXN manufactures glass bottles using flow production. The business has a number of stakeholder
groups including its 130 employees. CXN has benefitted from globalisation. Its products are exported
to 39 countries. The Managing Director knows that depreciation of an exchange rate can affect
business activity. She thinks all manufacturing businesses should contribute to sustainable
development.
(a) Identify two reasons for globalisation.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘depreciation of an exchange rate‘.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline one possible objective for each of the following stakeholder groups of CXN.
Government: .....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Employees: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 03_0450_12_2022_1.19

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(d) Explain one advantage and one disadvantage to CXN of using flow production.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think using renewable energy is the best way for a manufacturing business to contribute
to sustainable development? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2022 03_0450_12_2022_1.19 [Turn over

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2 Nancy wants to be an entrepreneur. She has analysed market research data and decided to start
up a book shop. Nancy has identified a suitable location and prepared a business plan. Nancy is
calculating her total costs. She will use this information to help her complete a break-even chart
as shown in Figure 2.1. Nancy is also considering using e-commerce.
Break-even chart for Nancy’s new business
X
costs and
revenue
$
total costs
break-even current level

output of output
output (units)
Fig. 2.1
(a) Identify X and Y.
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(b) Define ‘total cost’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
© UCLES 2022 03_0450_12_2022_1.19

5
(c) Identify four factors a service business should consider when deciding on a suitable location.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Factor 3: ...........................................................................................................................
...........................................................................................................................................
Factor 4: ...........................................................................................................................
........................................................................................................................................... [4]
(d) Explain two ways having a business plan could help Nancy.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2022 03_0450_12_2022_1.19 [Turn over

6
(e) Do you think the threats of e-commerce are greater than the opportunities for a new business?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2022 03_0450_12_2022_1.19

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3 D2G is a driving school. Mattan started D2G 3 years ago to teach people to drive a car. As the
business has been successful Mattan plans to buy a new vehicle. He has been analysing D2G’s
income statement. An extract is shown in Table 3.1. Mattan wants to understand the difference
between profit and cash. He also wants to know how an increase in competition and changes in
the business cycle might affect D2G.
Table 3.1
Extract from D2G’s income statement for the year ending 31 December 2021 ($)
Revenue 20 000
Gross profit 12 000
Profit for the year 2000
(a) State two stages of the business cycle.
Stage 1: ............................................................................................................................
...........................................................................................................................................
Stage 2: ............................................................................................................................
........................................................................................................................................... [2]
(b) Calculate D2G’s gross profit margin. Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline, with reference to D2G, the difference between profit and cash.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 03_0450_12_2022_1.19 [Turn over

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(d) Explain two ways D2G might respond to an increase in competition.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think leasing is the best source of finance for a small business to use for a new vehicle?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2022 03_0450_12_2022_1.19

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4 WTB is a private limited company. It manufactures breakfast cereals. WTB has 600 production
workers in its factory. Many of its employees are part-time. All employees receive training and
managers use delegation. The Human Resources Director is interested in using motivational theories
to help improve employee motivation. The directors plan to expand the business and are considering
whether to convert WTB into a public limited company.
(a) Define ‘delegation’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two motivational theories.
Theory 1: ..........................................................................................................................
...........................................................................................................................................
Theory 2: ..........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two benefits to WTB of having part-time employees.
Benefit 1: ..........................................................................................................................
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Benefit 2: ..........................................................................................................................
...........................................................................................................................................
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© UCLES 2022 03_0450_12_2022_1.19 [Turn over

10
(d) Explain two reasons why training might be important to WTB.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a public limited company is a better form of business organisation for a growing
business than a private limited company? Justify your answer.
...........................................................................................................................................
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© UCLES 2022 03_0450_12_2022_1.19

11
BLANK PAGE
© UCLES 2022 03_0450_12_2022_1.19

12
BLANK PAGE
Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge Local
Examinations Syndicate (UCLES), which is a department of the University of Cambridge.
© UCLES 2022 03_0450_12_2022_1.19

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
International General Certificate of Secondary Education
*4730436574*

Paper 1 May/June 2010
1 hour 45 minutes
Write your Centre number, candidate number and name on all the work you hand in.
Do not use staples, paper clips, highlighters, glue or correction fluid.

For Examiner’s Use
Total
This document consists of 11 printed pages and 1 blank page.
DC (CB/LD) 17527/3
2
1 Gabby is the production manager at a factory that manufactures a range of electrical products For
including televisions. The company uses flow production methods in its factory. Gabby was Examiner’s
looking at some data produced by the finance department. This data is shown in Table 1. Use
Table 1: Cost and Output Data
Output per week [units] Fixed costs [$000’s] Variable costs [$000’s]
2000 8000 6000
3000 8000 7000
(a) Calculate the cost per unit if the output of the factory is 3 000 units per week.
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two economies of scale that the factory might gain by increasing its weekly
output.
Economy of scale 1: ........................................................................................................
..........................................................................................................................................
Economy of scale 2: ........................................................................................................
...................................................................................................................................... [2]
(c) The factory uses flow production methods. Identify and explain two features of flow
production.
Feature 1: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Feature 2: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/11/M/J/10

3
(d) Rather than making components, Gabby’s company is going to buy them from another For
manufacturer. Identify and explain three advantages to Gabby’s company of doing this. Examiner’s
Use
Advantage 1: ...................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ...................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 3: ...................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Recently Gabby’s company has become much larger. Do you think that becoming larger
is an advantage for a business? Justify your answer.
..........................................................................................................................................
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© UCLES 2010 0450/11/M/J/10 [Turn over

4
2 AB is a large business providing services in country Z. Fig. 1 shows the market distribution of For
its sales in 2009. Table 2 shows a summary of its financial data in the same year. Examiner’s
Use
Fig. 1: Market Distribution of Sales (2009) Table 2: Financial Data (2009)
Sales turnover $750m

domestic
sales Net Profit $150m
export Net profit margin 20%
sales Return on capital employed 15%
(a) What is meant by a return on capital employed [ROCE]?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the value of domestic sales in 2009.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) AB has borrowed a lot of money from banks in order to expand. Identify and explain two
disadvantages to a company of owing a lot of money to banks.
Disadvantage 1: ..............................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage 2: ..............................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/11/M/J/10

5
(d) Country Z is in recession. Identify and explain three ways in which a recession might For
affect AB. Examiner’s
Use
Way 1: .............................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: .............................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 3: .............................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) The Government of country Z is to take control of AB. Do you think that this will be in the
best interests of the stakeholders in AB? Justify your answer.
..........................................................................................................................................
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6
3 Deco is an electronics company manufacturing a wide range of products. The company For
operates in a highly competitive and fast changing market. The management of Deco believe Examiner’s
that the company is ‘market orientated’. Use
(a) What is meant by a ‘market orientated’ company?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two possible disadvantages to Deco of having a wide range of products.
Disadvantage 1: ..............................................................................................................
..........................................................................................................................................
Disadvantage 2: ..............................................................................................................
...................................................................................................................................... [2]
(c) Deco is about to carry out some market research. It intends to use sampling to research
the market. Identify and explain two methods of sampling that Deco could use.
Method 1: ........................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: ........................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/11/M/J/10

7
(d) Deco also uses secondary market research. Identify and explain three reasons why the For
results of secondary market research might not always be useful to a business. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Deco wants to spend more on developing new products. In order to do this it will have to
spend less on market research. Do you think Deco should do this? Justify your answer.
..........................................................................................................................................
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..........................................................................................................................................
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8
4 Zola is the general manager of a hotel. He believes that customer service is important if For
guests are to enjoy their stay at the hotel. Zola manages his staff by a mixture of financial Examiner’s
incentives, such as bonuses, and by threats. The staff are paid on a time rate basis. Use
(a) What is meant by a financial bonus?
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two reasons why customer service is important.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage of paying staff by time rate.
Advantage: ......................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: .................................................................................................................
Explanation: ....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/11/M/J/10

9
(d) The hotel has a high staff turnover with a large number of employees leaving their For
job each year. Identify and explain three consequences of a high staff turnover to the Examiner’s
business. Use
Consequence 1: ..............................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Consequence 2: ..............................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Consequence 3: ..............................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that financial incentives are likely to be effective in motivating staff? Justify
your answer.
..........................................................................................................................................
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10
5 General Auto is a large global business. The management of General Auto are looking for a For
country where they might open a factory. Examiner’s
Use
(a) What is meant by a ‘global business’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two factors that might influence General Auto’s choice of country in which to
locate the factory.
Factor 1: ..........................................................................................................................
..........................................................................................................................................
Factor 2: ..........................................................................................................................
...................................................................................................................................... [2]
(c) Multinational companies are not always welcome in a country because they might
misuse their power. Explain how pressure groups might try and influence the behaviour
of such companies.
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© UCLES 2010 0450/11/M/J/10

11
Movements in exchange rates can cause problems for any business that trades globally. For
General Auto’ s home country is the United States. Examiner’s
Use
(d) Identify and explain three consequences for General Auto of a rise in the exchange rate
of the United States dollar.
Consequence 1: ..............................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Consequence 2: ..............................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Consequence 3: ..............................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) By examining the advantages and disadvantages that multinational companies create,
do you think that a Government should seek to attract these companies to their country?
Justify your recommendation.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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© UCLES 2010 0450/11/M/J/10

12
BLANK PAGE
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
© UCLES 2010 0450/11/M/J/10

*0981491897*

1 hour 45 minutes

Total
DC (AC/SW) 24021/1
2
1 Gabby is the production manager at a factory that manufactures a range of electrical For
products, including televisions. The company uses batch production methods in its factory. Examiner’s
Gabby has been looking at some data produced by the Finance department. This is shown in Use
Table 1.
Table 1: Cost and output data
$000’s
Output per week [units] Fixed costs Variable costs
2000 8000 4000
3000 8000 7000
(a) Calculate the cost per unit if the output of the factory is 2000 units per week.
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two variable costs that the business might incur.
Variable cost 1: ................................................................................................................
Variable cost 2: ............................................................................................................ [2]
(c) Identify and explain two features of batch production.
Feature 1: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/12/M/J/10

3
(d) Gabby is thinking of subcontracting the manufacturing of some of the company’s products For
to another company. Identify and explain three disadvantages to Gabby’s company of Examiner’s
subcontracting the manufacturing of its products. Use
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage 3: ...............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Governments sometimes pass laws to make markets more competitive. Do you think
that competition always benefits consumers? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

4
2 Company WLP is a large company providing services in country Z. Fig. 1 shows the market For
distribution of its sales in 2009. Table 2 shows selected financial data for the company in the Examiner’s
same year. Use
Distribution of sales for company WLP Selected financial data for company WLP
2009 2009
Key: Sales turnover $750m

domestic sales Net profit $150m
Net profit margin 20%
export sales Return on capital employed 15%
Fig. 1 Table 2
(a) What is meant by the ‘net profit margin’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the value of export sales in 2009.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to company WLP of raising extra capital from its
shareholders instead of increasing its borrowing.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/12/M/J/10

5
(d) The economy of country Z is experiencing a high rate of inflation. Identify and explain For
three ways in which high inflation might affect WLP. Examiner’s
Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) WLP is now in financial difficulties. If WLP stops trading this will affect the interests of
its stakeholders. Should the Government in country Z provide financial support in these
circumstances? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

6
3 Halitec makes computers using flow production. It is the market leader and is well known for For
the quality of its products. The business is ‘product orientated’ and its management believe Examiner’s
that this is the reason for its success. However, the management know that efficiency in its Use
factory can be improved.
(a) What is meant by a business that is ‘product orientated’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by ‘market leader’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to Halitec of using flow production.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/12/M/J/10

7
(d) Identify and explain three methods that Halitec could use to improve efficiency in its For
factory. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that Halitec would benefit from spending money on market research?
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

8
4 Michelle is the Head Teacher of a large school. She is an autocratic leader. She believes that For
highly motivated teachers are very important if the school is to get good examination results. Examiner’s
The teachers are all paid the same salary. Use
(a) What is meant by an ‘autocratic leader’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by ‘highly motivated’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to the teachers of them all
being paid the same salary.
Advantage: .......................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/12/M/J/10

9
(d) Identify and explain three factors that Michelle should consider when recruiting new For
teachers to her school. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the motivation of the teachers would increase if Michelle used a
democratic leadership style? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

10
5 AVC is a private limited company that makes fashion clothing. At the moment it sells all For
its products to customers in its own country. However, the management of AVC is thinking Examiner’s
of exporting goods, although it knows there are problems of entering new markets. All the Use
workers at AVC are members of a trade union.
(a) What is meant by a ‘private limited company’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two advantages to AVC of exporting its clothing.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two methods that the trade union could use to encourage the
management of AVC to increase the wages of its workers.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/12/M/J/10

11
(d) Identify and explain three problems that AVC might face if it exported its clothing to For
other countries. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) AVC has recently received a takeover bid from a multinational clothing manufacturer.
Do you think that the stakeholders in AVC would benefit if the takeover went ahead?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]
© UCLES 2010 0450/12/M/J/10

12
BLANK PAGE
© UCLES 2010 0450/12/M/J/10

*5714728692*

1 hour 45 minutes

Total
DC (CW/SW) 28028
2
1 Gabby is the production manager at a factory that manufactures a range of electrical For
products, including televisions. The company uses batch production methods in its factory. Examiner’s
Gabby has been looking at some data produced by the Finance department. This is shown in Use
Table 1.
Table 1: Cost and output data
$000’s
Output per week [units] Fixed costs Variable costs
2000 8000 4000
3000 8000 7000
(a) Calculate the cost per unit if the output of the factory is 2000 units per week.
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two variable costs that the business might incur.
Variable cost 1: ................................................................................................................
Variable cost 2: ............................................................................................................ [2]
(c) Identify and explain two features of batch production.
Feature 1: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/13/M/J/10

3
(d) Gabby is thinking of subcontracting the manufacturing of some of the company’s products For
to another company. Identify and explain three disadvantages to Gabby’s company of Examiner’s
subcontracting the manufacturing of its products. Use
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage 3: ...............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Governments sometimes pass laws to make markets more competitive. Do you think
that competition always benefits consumers? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

4
2 Company WLP is a large company providing services in country Z. Fig. 1 shows the market For
distribution of its sales in 2009. Table 2 shows selected financial data for the company in the Examiner’s
same year. Use
Distribution of sales for company WLP Selected financial data for company WLP
2009 2009
Key: Sales turnover $750m

domestic sales Net profit $150m
Net profit margin 20%
export sales Return on capital employed 15%
Fig. 1 Table 2
(a) What is meant by the ‘net profit margin’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the value of export sales in 2009.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to company WLP of raising extra capital from its
shareholders instead of increasing its borrowing.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/13/M/J/10

5
(d) The economy of country Z is experiencing a high rate of inflation. Identify and explain For
three ways in which high inflation might affect WLP. Examiner’s
Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) WLP is now in financial difficulties. If WLP stops trading this will affect the interests of
its stakeholders. Should the Government in country Z provide financial support in these
circumstances? Justify your answer.
..........................................................................................................................................
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6
3 Halitec makes computers using flow production. It is the market leader and is well known for For
the quality of its products. The business is ‘product orientated’ and its management believe Examiner’s
that this is the reason for its success. However, the management know that efficiency in its Use
factory can be improved.
(a) What is meant by a business that is ‘product orientated’?
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...................................................................................................................................... [2]
(b) What is meant by ‘market leader’?
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(c) Identify and explain two advantages to Halitec of using flow production.
Advantage 1: ....................................................................................................................
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Advantage 2: ....................................................................................................................
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© UCLES 2010 0450/13/M/J/10

7
(d) Identify and explain three methods that Halitec could use to improve efficiency in its For
Use
Method 1: .........................................................................................................................
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Method 2: .........................................................................................................................
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Method 3: .........................................................................................................................
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(e) Do you think that Halitec would benefit from spending money on market research?
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8
4 Michelle is the Head Teacher of a large school. She is an autocratic leader. She believes that For
highly motivated teachers are very important if the school is to get good examination results. Examiner’s
The teachers are all paid the same salary. Use
(a) What is meant by an ‘autocratic leader’?
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(b) What is meant by ‘highly motivated’?
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(c) Identify and explain one advantage and one disadvantage to the teachers of them all
being paid the same salary.
Advantage: .......................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Disadvantage: ..................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2010 0450/13/M/J/10

9
(d) Identify and explain three factors that Michelle should consider when recruiting new For
teachers to her school. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that the motivation of the teachers would increase if Michelle used a
democratic leadership style? Justify your answer.
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10
5 AVC is a private limited company that makes fashion clothing. At the moment it sells all For
its products to customers in its own country. However, the management of AVC is thinking Examiner’s
of exporting goods, although it knows there are problems of entering new markets. All the Use
workers at AVC are members of a trade union.
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..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two advantages to AVC of exporting its clothing.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two methods that the trade union could use to encourage the
management of AVC to increase the wages of its workers.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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11
(d) Identify and explain three problems that AVC might face if it exported its clothing to For
other countries. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) AVC has recently received a takeover bid from a multinational clothing manufacturer.
Do you think that the stakeholders in AVC would benefit if the takeover went ahead?
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1 hour 45 minutes

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DC (SM/CGW) 36366/2
2
1 Autobrake is a business that manufactures brake systems for cars. Fig. 1 shows its market For
share in 2005 and 2010. The market for brake systems was worth $70m in 2010. It is likely Examiner’s
to become an increasingly competitive market. Autobrake’s management believe that the Use
company needs to develop a wider range of products if it is to be profitable in the future.
Fig.1: Market shares for brake systems
2010 = Autobrake
year = other companies

2005
0 20 40 60 80 100
% market share
(a) What is meant by an ‘increasingly competitive market’?
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(b) Calculate the value of Autobrake’s sales in 2010.
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(c) Autobrake uses flow production in its factories. Identify and explain two benefits of using
flow production.
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/M/J/11

3
(d) Identify and explain three possible reasons why Autobrake’s market share changed For
between 2005 and 2010. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that investing in a wider range of products will mean that the business will
become more profitable in the future? Justify your answer.
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4
2 The economy of country A is in recession. To deal with the problems caused by the recession, For
the Government has cut interest rates and reduced taxes. These changes have had a big Examiner’s
impact on businesses in country A. The Government has also introduced laws to protect Use
employees at work. Some people have suggested that the Government should give grants
and subsidies to private sector businesses to help them survive.
(a) What is meant by the term ‘recession’?
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(b) Identify two ways in which consumers might be affected by a recession.
Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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(c) Identify and explain two consequences of a fall in interest rates on businesses in
country A.
Consequence 1: ...............................................................................................................
Explanation: .....................................................................................................................
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Consequence 2: ...............................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/M/J/11

5
(d) Identify and explain three ways by which employees can be protected at work by For
Government laws. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that Governments should give financial support to private sector
businesses to survive in a recession? Justify your answer.
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6
3 Sarah set up a business as a sole trader running a nursery for small children too young For
to go to school. The business is successful and has opened a number of new nurseries. Examiner’s
Sarah took on a business partner in 2007. Growth has continued and now the business has Use
10 nurseries in different towns and villages. Sarah is planning to open another nursery and is
looking for a suitable location.
(a) What is meant by the term ‘sole trader’?
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...................................................................................................................................... [2]
(b) A nursery school is classified as a tertiary sector activity. Identify two other examples of
businesses that are also in the tertiary sector.
Example 1: .......................................................................................................................
Example 2: ................................................................................................................... [2]
(c) Identify and explain two advantages to Sarah of having a business partner.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/M/J/11

7
(d) Identify and explain three factors Sarah should consider when choosing a suitable For
location for a new nursery. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that it would be a good idea for Sarah to continue to expand her business?
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8
4 Trucker is a public limited company that makes products such as tractors and construction For
vehicles. Table 1 gives selected information from its Balance Sheet for the last two years. Examiner’s
Use
Table 1: Trucker’s Balance Sheet as at 30 June
$m
2009 2010
Fixed Assets 200 225

Current Assets 150 180
Current Liabilities 90 100
Net Assets 260 305
Financed by:
Long term Liabilities 200 220
Shareholders’ Funds 60 85
Capital Employed 260 305
(a) What is meant by the term ‘shareholders’ funds’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) Identify two examples of Trucker’s current assets.
Example 1: .......................................................................................................................
Example 2: ................................................................................................................... [2]
(c) Identify and explain two reasons why a business might have creditors.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/M/J/11
9
(d) Identify and explain three possible reasons why Trucker’s net assets increased in 2010. For
Examiner’s
Reason 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Can the success of Trucker’s business be assessed just by analysing its Balance Sheet?
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10
5 Fig. 2 shows the organisational structure of ABC, a business that manufactures toys. For
As the business has grown, the management has found it difficult to maintain good internal Examiner’s
communication and to control activities. ABC always recruits its senior managers from within Use
the company.
Fig. 2: ABC’s organisational structure
(a) What is meant by the term ‘internal communication’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) Identify two features of the organisational structure of ABC as shown in Fig. 2.
Feature 1: .........................................................................................................................
Feature 2: ..................................................................................................................... [2]
(c) Identify and explain two reasons why managers may be reluctant to delegate tasks to
employees in their organisation.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/M/J/11

11
(d) Identify and explain three advantages to ABC of recruiting senior managers from within For
the business. Examiner’s
Use
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 3: ....................................................................................................................
Explanation: .....................................................................................................................
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(e) Recommend two ways in which communication could be improved in a large

organisation. Justify your recommendations.
Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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DC (SM/CGW) 36369/1
2
1 Terfil Enterprises organises special events such as concerts and music festivals. The founder, For
Ceri Terfil, converted the business into a private limited company in 2004. ‘We are in a niche Examiner’s
market’ said Ceri ‘and have built a reputation for efficiency and low prices. I would like the Use
business to continue to grow in the future’.
(a) What is meant by the term ‘niche market’?
..........................................................................................................................................
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(b) Identify two objectives that Ceri might have had for his business when he started it.
Objective 1: ......................................................................................................................
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Objective 2: ......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to Ceri of converting the business to a private
limited company.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/12/M/J/11

3
(d) Identify and explain three potential problems to Terfil Enterprises of continuing to grow For
in the future. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) How important are low prices in determining the long term success of Terfil Enterprises?
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4
2 Telefax is a business that manufactures a range of electronic products. Table 1 shows For
selected information from its latest Balance Sheet. Examiner’s
Use
Table 1: Balance Sheet Telefax as at 30 June
$m
2009 2010
Fixed Assets 30 40
Net Assets 30 44
Financed by:
(a) What is meant by the term ‘fixed assets’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two examples of Telefax’s current liabilities.
Example 1: .......................................................................................................................
Example 2: ................................................................................................................... [2]
(c) Identify and explain two reasons why most businesses have debtors.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [4]
© UCLES 2011 0450/12/M/J/11

5
(d) Identify and explain three reasons why Telefax’s bank manager might want to see the For
accounts of the business. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that the financial position of Telefax has improved in 2010? Justify your
answer.
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6
3 Kemptown Fried Chicken is a chain of fast food restaurants. The business is unsuccessful For
because it is badly managed. There is no organisational structure. Job tasks and roles are Examiner’s
unclear. The workers are demotivated and low paid. Communication in the business is poor Use
and meetings are rarely held because the management think they are ‘a non-productive use
of time’.
(a) What is meant by the term ‘organisational structure’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) What is meant by ‘communication in the business is poor’?
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages of delegating tasks in an organisation.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2011 0450/12/M/J/11

7
(d) Identify and explain three reasons why meetings between managers and workers can For
benefit the business. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) How effective is money in motivating workers? Justify your answer.
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8
4 Delwar makes car tyres. The business is located in country Z. At present, all its sales are to For
customers in country Z. Delwar is the market leader in this country. Fig. 1 gives data regarding Examiner’s
its market share. The total value of car tyre sales in country Z in 2010 was $50m. This market Use
is no longer growing. The Managing Director of Delwar thinks that exporting tyres is the way
forward. There will be both costs and benefits of exporting tyres.
Fig. 1: Bar chart showing market share
% market share
100
80
60
40 = other companies
20 = Delwar
2005 2010
year
(a) What is meant by the term ‘market leader’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the value of Delwar’s sales in 2010.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible reasons why the market for car tyres in country Z is no
longer growing.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2011 0450/12/M/J/11

9
(d) Identify and explain three methods Delwar could use to increase its market share in For
country Z. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think Delwar’s profits would increase if the business were to export its tyres?
..........................................................................................................................................
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10
5 Extracto is a multinational mining business. It has recently found mineral deposits in For
country X. The Managing Director hopes that the deposits found are large enough for them Examiner’s
to make a good profit. Some pressure groups in country X think that Extracto has only Use
considered the financial benefits of its plans and has ignored the social costs.
(a) What is meant by a ‘financial benefit’?
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two examples of social costs that extraction of minerals might create.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which pressure groups could influence Extracto’s
decisions.
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2011 0450/12/M/J/11

11
(d) Identify and explain three factors that Extracto should consider before deciding whether For
to begin mining in country X. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Governments often aim to attract multinational companies into their countries. Do you
think that they should do this? Justify your answer.
..........................................................................................................................................
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* 9 8 4 7 2 0 2 0 3 3 *

1 hour 45 minutes

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DC (RCL (JDA)) 49142/3

2
1 IRKAM is a company that produces high quality doors for hotels and offices. The company For
currently uses job production. The Managing Director, Abdul, believes that quality control Examiner’s
is important. He is looking for ways to increase productivity. All workers receive on-the-job Use
training. Abdul is thinking of including off-the-job training as well.
(a) What is meant by ‘productivity’?
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(c) Identify and explain one advantage and one disadvantage of off-the-job training for
IRKAM.
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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3
(d) Identify and explain two reasons why quality control might be important to IRKAM. For
Examiner’s
Reason 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
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Reason 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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(e) Over the past three years there has been a large increase in demand for IRKAM’s doors.
Do you think job production is still the best method of production for IRKAM? Justify
your answer.
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4
2 Sunil is a sole trader. He likes owning a small business. His shop sells low price raincoats. For
Sales vary throughout the year. The market for raincoats is competitive, but as Sunil makes Examiner’s
a profit he doesn’t think competition is a problem for his business. In order to protect Use
consumers, the Government of Sunil’s country has recently introduced new laws to protect
consumers.
(a) What is meant by ‘profit’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two factors which could affect demand for Sunil’s products.
Factor 1: ...........................................................................................................................
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Factor 2: ...........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why profit is important to small businesses like Sunil’s.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/11/M/J/12

5
(d) Identify and explain one way in which consumer protection laws might affect Sunil’s For
business and one way consumer protection laws might affect his customers. Examiner’s
Use
Way consumer laws affect Sunil’s business: ....................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way consumer laws affect Sunil’s customers: .................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
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(e) Do you think the advantages of owning a small business are greater than the
disadvantages for Sunil? Justify your answer.
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6
3 The Government of country H is concerned about the effect of business activity on the For
environment. It wants to encourage sustainable development. To do this, it is planning to Examiner’s
introduce laws to encourage environmentally-friendly production methods. A number of Use
businesses will be affected by these new laws.
The Government of country H has collected the data shown in Table 1. Gross Domestic
Product (GDP) measures the value of the total output produced in a country in one year. The
GDP of country H has risen from $625m in 2000 to $825m in 2011.
Table 1: Percentage of GDP by different sectors
% of GDP
2000 2011
Primary sector 35 15
Secondary sector 40 25
Tertiary sector 25 60
(a) What is meant by ‘tertiary sector’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) What is meant by ‘sustainable development’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(c) Identify and explain two changes between 2000 and 2011 that are shown in Table 1.
Change 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Change 2: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2012 0450/11/M/J/12
7
(d) Identify and explain three ways a Government could encourage more businesses to set For
up in its country. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that all businesses will be affected by the introduction of the new laws to
encourage environmentally-friendly production methods? Justify your answer.
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8
4 Rapid Call is a private limited company. It manufactures a range of cell (mobile) phones. For
The demand for these is increasing. Its products have several special features that are Examiner’s
not available from other phone manufacturers. It sells its products directly to retail shops. Use
Rapid Call uses competitive pricing for all products. The Finance Director has been looking
at the accounts. A summary is shown in Table 2. In 2011 the gross profit margin was 40%.
Table 2: Profit/Loss Account for Rapid Call for year ending 30 April 2012 ($000s)
Sales 450
Cost of Sales 300
Gross Profit 150
Overheads 95
Net Profit 55
(a) What is meant by ‘private limited company’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Calculate the gross profit margin for the year ending 30 April 2012.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways in which Rapid Call’s Finance Director could use the
information in Table 2.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
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Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/11/M/J/12

9
(d) The Marketing Director is thinking about changing the channel of distribution. Identify For
and explain three factors that Rapid Call should consider when choosing a suitable Examiner’s
channel of distribution. Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
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Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) How important is increased competition in influencing the marketing strategy of

Rapid Call? Justify your answer.
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10
5 Favell is a woodworker. He is planning to set up his own woodworking business. He plans For
to use marketing to help his business become established in the local area. Favell thinks Examiner’s
cash flow will be a problem because his business will have a lot of cash outflows. A friend Use
has suggested he prepares a cash flow forecast.
(a) What is meant by ‘marketing’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two possible cash outflows for Favell’s business.
Cash outflow 1: .................................................................................................................
Cash outflow 2: ............................................................................................................ [2]
(c) Identify and explain two benefits for any business of preparing a cash flow forecast.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/11/M/J/12

11
(d) Favell is looking at various methods of promotion for his business. Identify and explain For
three suitable methods of promotion that Favell could use to attract customers. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
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Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
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Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Favell needs $10 000 to buy a motor vehicle so that he can carry all his equipment. He is
planning to ask the bank for an overdraft. Do you think this is the most suitable source of
finance for him to choose? Justify your answer.
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12
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© UCLES 2012 0450/11/M/J/12

* 8 7 5 5 8 2 0 1 1 1 *

1 hour 45 minutes

Total
DC (RCL (KM)) 49139/3

2
1 Made Fresh is a company that manufactures high quality organic foods. The company uses For
ingredients that have been grown by local farmers in country J. Market research has shown Examiner’s
that branding has helped the company to achieve its objectives. Recent bad weather in Use
country J has led to many of the farm crops failing. Made Fresh is thinking about importing
organic food ingredients from other countries nearby.
(a) What is meant by ‘market research’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Identify two possible objectives Made Fresh could have.
Objective 1: ......................................................................................................................
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Objective 2: ......................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two advantages to a business of branding.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2012 0450/12/M/J/12

3
(d) Identify and explain three possible problems Made Fresh might face if they have to For
import organic ingredients for the foods they manufacture. Examiner’s
Use
Problem 1: ........................................................................................................................
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Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
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Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) The Government in country J wants to encourage international trade. Do you think this
would be an advantage to Made Fresh? Justify your answer.
..........................................................................................................................................
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4
2 Bray Electrics is a large manufacturing company. The company makes engine parts for For
the car industry using batch production. The Managing Director is always looking for ways Examiner’s
to introduce new technology in the business. He believes ‘our workers like change’. He is Use
interested in using lean production methods.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two ways of measuring the size of a company.
Way 1: ..............................................................................................................................
Way 2: ......................................................................................................................... [2]
(c) Identify and explain two benefits of lean production for a business.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/12/M/J/12

5
(d) Identify and explain three advantages to the management of Bray Electrics of introducing For
new technology in the business. Examiner’s
Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Advantage 3: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) The Managing Director believes ‘our workers like change’. Do you think that all the
workers at Bray Electrics would like the introduction of new technology? Justify your
answer.
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6
3 HTB is a public limited company. It manufactures a range of computers. HTB spends a lot For
of money on advertising as it is in a competitive market. The management believes that the Examiner’s
product is the most important element in their marketing mix. To meet increasing demand Use
HTB is looking to expand their business. It plans to raise extra capital by issuing more shares.
The Finance Director has been looking at the data in Table 1.
Table 1: Selected financial data from HTB ($m)
2011 2012
Sales 400 520
Net Profit 40 75
Long Term Liabilities 200 220
(a) What is meant by ‘public limited company’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Calculate the Return on Capital Employed for 2012.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why shareholders might be interested in the accounts
of HTB.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/12/M/J/12

7
(d) Identify and explain three factors that HTB should consider before issuing more shares. For
Examiner’s
Factor 1: ........................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that the product is the most important element of the marketing mix for
HTB? Justify your answer.
..........................................................................................................................................
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8
4 Cole Brokers is a medium sized company. The company provides a range of insurance For
products to customers around the world. It operates in a highly competitive market. Many Examiner’s
insurance businesses are now using the Internet as a way to sell their products. The Use
management of Cole Brokers has been looking at its current organisational structure. They
think the span of control and chain of command need to be changed.
(a) What is meant by ‘organisational structure’?
..........................................................................................................................................
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..................................................................................................................................... [2]
..........................................................................................................................................
..........................................................................................................................................
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(c) Identify and explain two possible disadvantages for a business of having a wide span of
control.
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/12/M/J/12

9
(d) Identify and explain three reasons why effective communication within a business is For
important to the management. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) The management of Cole Brokers think that the disadvantages of e-commerce are
greater than the advantages to their business. Do you agree? Justify your answer.
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10
5 Sachs-Tech makes parts for the mobile phone industry. Sales have risen very quickly. The For
company needs a new factory to meet demand. The management is not sure where to build Examiner’s
the factory. The company is currently looking to recruit three new production supervisors. Use
The Human Resources manager, Manuel, is busy writing a job description and person
specification for these supervisor roles.
(a) What is meant by a ‘job description’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two possible features of a person specification.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two suitable places where Manuel could advertise the vacancies.
Place 1: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Place 2: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/12/M/J/12

11
(d) Identify and explain three factors that Sachs-Tech should consider when deciding where For
to locate a new factory. Examiner’s
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) The Finance manager is worried that the business might be growing too quickly. Do you
think he is right to be worried? Justify your answer.
..........................................................................................................................................
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12
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* 2 3 3 0 2 2 7 1 4 0 *

1 hour 45 minutes

Total
DC (NF) 58382
2
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
Objective 1: ......................................................................................................................
..........................................................................................................................................
Objective 2: ......................................................................................................................
..................................................................................................................................... [2]
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/M/J/12

3
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
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Explanation: .....................................................................................................................
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4
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
Way 1: ..............................................................................................................................
Way 2: ......................................................................................................................... [2]
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/M/J/12

5
Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 3: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
answer.
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

6
2011 2012
Sales 400 520
Net Profit 40 75
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
..........................................................................................................................................
..................................................................................................................................... [2]
of HTB.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/M/J/12

7
Examiner’s
Factor 1: ........................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
..........................................................................................................................................
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8
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..................................................................................................................................... [2]
..........................................................................................................................................
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..................................................................................................................................... [2]
control.
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/M/J/12

9
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
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10
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
Place 1: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Place 2: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/M/J/12

11
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
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Explanation: .....................................................................................................................
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* 7 2 7 7 6 8 0 9 4 4 *

1 hour 45 minutes

DC (AC) 63116/2
2
1 Kew Construction is a public limited company. It specialises in building large houses. Each For
house costs $30 000 to build and the company adds 40% to total cost to calculate the selling Examiner’s
price. Last year sales fell by $90m and dividends were reduced. The Human Resources Use
Director is worried: ‘If sales do not improve, I will need to make some workers redundant.
How can I decide which workers to make redundant?’
(a) What is meant by ‘dividends’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the selling price of one house.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two disadvantages to a business of being a public limited company.
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
...................................................................................................................................... [4]
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3
(d) Identify and explain three methods that Kew Construction could use to improve its level For
of sales. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) What do you think are the most important factors for the Human Resources Director to
consider when selecting which workers to make redundant? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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4
2 Gayle’s Soaps is a business which manufactures health and beauty products. Its market For
share has remained constant at 15% despite new businesses entering this market. The Examiner’s
business uses market segmentation. Most of its customers are women. The Marketing Use
manager believes the company could increase its profits if it increases the price of each of its
most popular products.
(a) What is meant by ‘market share’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two ways (other than gender) that Gayle’s Soaps could segment its market.
Way 1: ..............................................................................................................................
Way 2: ........................................................................................................................... [2]
(c) Identify and explain two advantages of market segmentation for Gayle’s Soaps.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
...................................................................................................................................... [4]
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5
(d) Identify and explain three problems that a business might have when trying to enter a For
new market. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that if Gayle’s Soaps decides to increase prices then this will lead to higher
profits? Justify your answer.
..........................................................................................................................................
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6
3 Sharma Machine manufactures motorcycles. The company is product orientated. Sharma For
Machine holds a lot of stock. The owner, Ishant, wants to increase productivity. Also the Examiner’s
company plans to open an additional factory to satisfy increased demand. ‘Expansion should Use
mean economies of scale’ said Ishant. ‘The right location for the new factory is going to be
important if the business is to remain competitive.’
(a) What is meant by ‘product orientated’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two possible economies of scale the business might benefit from if it expands.
Economy of scale 1: .........................................................................................................
Economy of scale 2: ..................................................................................................... [2]
(c) Identify and explain two possible problems for Sharma Machine of holding a lot of stock.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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7
(d) Identify and explain three methods that Ishant could use to increase productivity. For
Examiner’s
Method 1: ......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) How important is the right location for the new factory in helping Sharma Machine to
remain competitive? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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8
4 Luxury Destinations owns three hotels in country X. The business spends a lot of money For
on staff training. The Finance Director is pleased with the financial position of the business. Examiner’s
‘However, the appreciation of our country’s currency and the Government’s plan to increase Use
taxes might cause problems to our business in the future’ he said.
Table 1: Luxury Destinations financial information ($000s)
2011 2012
Net profit 30 60
Fixed assets 300 350

(a) What is meant by ‘appreciation of our country’s currency’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two problems that an increase in taxes could cause for Luxury
Destinations.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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9
(d) Identify and explain three benefits for Luxury Destinations of training its employees. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think the Finance Director is right to be pleased with the financial position of the
business? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

10
5 AM Designs is a private sector business. It makes dresses. It is a successful business For

because it adds value. Amira is directly responsible for a team of 12 people. ‘I want to keep a Examiner’s
short chain of command but I do need a manager to help me. I must find someone with the Use
right qualities. All of my team are highly motivated and someone with the wrong management
style might cause problems.’
(a) What is meant by the ‘private sector’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two ways that a business could increase added value.
Way 1: ...............................................................................................................................
..........................................................................................................................................
Way 2: ...............................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages of a short chain of command for Amira.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
...................................................................................................................................... [4]
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11
(d) Identify and explain three qualities that Amira might look for in a manager. For
Examiner’s
Quality 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Quality 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Quality 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the management style of the new manager might cause problems?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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* 6 1 2 3 3 4 4 7 8 3 *

1 hour 45 minutes

DC (AC) 63117/2
2
1 Brakker is a public limited company which specialises in building large boats. Each boat For
costs $4m to build and the company adds 30% to the total cost to calculate the selling price. Examiner’s
‘Last year profits fell – but this happens in a recession’ said the Finance Director. ‘Yes, I am Use
worried. If we cannot get more orders we will have to make some of our skilled workers
redundant.’ All Brakker workers are members of a trade union.
(a) What is meant by a ‘recession’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the selling price of a boat.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to a business of being a public limited company.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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3
(d) Identify and explain three benefits to Brakker’s workers of being members of a trade For
union. Examiner’s
Use
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think it is a good idea for Brakker to make some of its skilled workers redundant
during a recession? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

4
2 B&G manufactures a popular hair shampoo called Slick. The Managing Director thinks that For
Slick is near the end of its product life cycle. He believes it would be better to use extension Examiner’s
strategies rather than develop a new product. The Operations Director thinks quality control Use
can help the business comply with new consumer protection laws.
(a) What is meant by ‘quality control’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two stages of the product life cycle.
Stage 1: ............................................................................................................................
Stage 2: ........................................................................................................................ [2]
(c) Identify and explain two ways in which consumer protection laws could benefit B&G’s
customers.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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5
(d) Identify and explain three possible problems for B&G when developing a new product. For
Examiner’s
Problem 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Explain two possible extension strategies that B&G could use for Slick. Recommend
which strategy the company should use. Justify your answer.
Strategy 1: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Strategy 2: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

6
3 Emir is the Production manager at a large food production factory. He wants to lower For
average cost to help the business remain competitive. All workers are paid using time rate. Examiner’s
Emir believes that good internal communication is important. The company has decided to Use
stop importing raw materials as this causes a lot of problems. Emir must choose a suitable
method of communication to tell the overseas suppliers of his decision.
(a) What is meant by ‘internal communication’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two suitable methods of communication Emir could use to tell the overseas
suppliers of his decision to stop importing raw materials.
Method 1: .........................................................................................................................
Method 2: ..................................................................................................................... [2]
(c) Identify and explain two payment methods for workers that this business could use
(other than time rate).
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
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7
(d) Identify and explain two possible problems of importing raw materials for this food For
production business. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Explain two ways in which the Production manager could reduce average cost.
Recommend which way should be used. Justify your answer.
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

8
4 Belshire Books owns a number of shops. The Finance manager is worried about the financial For
position of the company. An extract of the accounts is shown in Table 1. Belshire Books is Examiner’s
facing increased competition from online booksellers selling through the Internet. Use
Table 1: Extract from Belshire Books accounts ($000s)
2011 2012
Net profit 50 30
(a) What is meant by ‘net profit’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which Belshire Books could improve profitability.
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
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9
(d) Identify and explain two problems that competition from online (Internet) booksellers For
could cause for Belshire Books. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the Finance manager is right to be worried about the financial position
of the business? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

10
5 ANZ is a large multinational company which manufactures aeroplanes. Growth is an For

important objective for the company. ANZ wants to start producing in country P for the first Examiner’s
time. The new factory will operate for 24 hours a day. A pressure group in country P believes Use
that all business activity is bad for the environment. It wants the Government to do more to
control business activity.
(a) What is meant by ‘pressure group’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two measures a Government could use to control business activity.
Measure 1: .......................................................................................................................
Measure 2: .................................................................................................................... [2]
(c) Identify and explain two reasons why objectives are important to businesses such as
ANZ.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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11
(d) Identify and explain three advantages for country P of ANZ’s decision to open a new For
Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 3: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that all business activity is bad for the environment? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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© UCLES 2013 0450/12/M/J/13

* 2 4 8 9 1 1 4 4 9 1 *

1 hour 45 minutes

DC (AC) 63118/2
2
1 Akbar Metal is a private limited company. It manufactures parts for the bicycle industry. For
Workers are paid by piece rate. 60% of the company’s products are sold to one customer. Examiner’s
Akbar Metal plans to introduce flow production to meet increased demand. ‘It’s a good idea’ Use
says the Production manager. ‘We will need to buy new machinery. This should lead to cost
savings. We need to decide which source of finance to use.’
(a) What is meant by ‘piece rate’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two possible cost savings for Akbar Metal of using new machinery.
Cost saving 1: ..................................................................................................................
..........................................................................................................................................
Cost saving 2: ..................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible advantages to Akbar Metal of selling 60% of its
products to one customer.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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3
(d) Identify and explain three possible problems of flow production for businesses like For
Akbar Metal. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Explain two suitable sources of finance for the purchase of new machinery. Recommend
which source Akbar Metal should use. Justify your answer.
Source 1: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Source 2: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

4
2 Walker Fashion makes handmade suits for men. It sells in a niche market. Each suit costs For
$300 to make and the company adds 40% to the total cost to calculate the selling price. Last Examiner’s
year the company’s sales fell. The Finance Director is worried. He said: ‘We might have to Use
make some skilled workers redundant if we can’t improve sales.’
(a) What is meant by a ‘niche market’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the selling price of a suit.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two benefits to Walker Fashion of having skilled workers.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2013 0450/13/M/J/13

5
(d) Identify and explain two factors Walker Fashion needs to consider when setting a price For
for its suits. Examiner’s
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Explain two methods (other than pricing) that Walker Fashion could use to improve
sales. Recommend which method Walker Fashion should use. Justify your answer.
Method 1: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

6
3 Kipta manufactures a range of cleaning products. All products are made using batch For
production. The safety of workers is important as chemicals are used to make the products. Examiner’s
Revenue is falling due to increasing competition. The owner plans to develop new products. Use
She believes that market research would be useful to the successful introduction of any new
products.
(a) What is meant by ‘revenue’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two features of batch production.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways that Kipta could improve the safety of workers.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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7
(d) Identify and explain three benefits for consumers of increased competition. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) How important is market research to the successful introduction of a new product?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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8
4 Bolton Hotel is a family-owned hotel. Most of its revenue is made in January and February. For
An extract of the hotel’s accounts is shown in Table 1. The Managing Director said: ‘I need to Examiner’s
find ways to improve liquidity’. He is also concerned about the high level of staff turnover. He Use
thinks that poor motivation might be the reason for many staff leaving their jobs.
Table 1: Extract from Bolton Hotel’s balance sheet ($000s)
2011 2012
Current assets: 40 30
Stock 20 20
Debtors 10 8
Cash 10 2
(a) What is meant by a ‘balance sheet’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the acid test ratio for 2012.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two problems for a business caused by many of its staff leaving.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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9
(d) Identify and explain three suitable ways to improve motivation of staff at Bolton Hotel. For
Examiner’s
Way 1: .............................................................................................................................. Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Explain two ways to improve the liquidity of the hotel. Recommend which way the
Managing Director should use. Justify your answer.
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

10
5 Country G has a market economy. There are no employment laws and trade unions are not For
allowed. GreenStar is located in country G. It sells designer clothing to retailers in Asia and Examiner’s
Europe. GreenStar’s Managing Director wants the business to grow. He is concerned that Use
country G’s appreciating exchange rate will affect the competitiveness of the business.
(a) What is meant by a ‘market economy’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by a ‘trade union’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Explain the possible effect of an appreciation in country G’s exchange rate on the
competitiveness of GreenStar.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
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11
(d) Identify and explain three reasons why the Managing Director of GreenStar might want For
the business to grow. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think it would benefit businesses in country G if there were employment laws?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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* 4 2 9 6 9 9 8 0 6 8 *

1 hour 45 minutes

DC (CW/SW) 79706/2
2
1 Anouk is a sole trader. She designs and makes jewellery at home, using hired (rented) equipment.
Anouk enjoys selling the jewellery at local markets. Last year her sales revenue increased by $500
to $3000. She plans to use $50 for a marketing budget. Anouk would like to do some primary
market research when she has time. Anouk thinks she should have a business partner.
(a) What is meant by a ‘marketing budget’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two methods of primary market research that Anouk could use.
Method 1: ..................................................................................................................................
Method 2: ..............................................................................................................................[2]
(c) Identify and explain two possible advantages for Anouk of hiring equipment.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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3
(d) Identify and explain two disadvantages to Anouk of having a business partner.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Anouk could use either leaflets or local newspaper advertising as methods of promoting her
jewellery. Recommend which method you think Anouk should use. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

4
2 Keypeople is a recruitment agency which only operates in one small town in country Z. Its owner,
Rachel, and her two employees know that good customer service is important. Rachel would like to
expand her business. Keypeople offers a variety of human resource services to other businesses,
such as recruiting employees and preparing employment contracts. Rachel has been asked by a
local manufacturing business to recruit a senior manager.
(a) Identify two examples of tertiary sector business activity in your country, other than a
recruitment agency.
Example 1: ................................................................................................................................
Example 2: ............................................................................................................................[2]
(b) Identify two reasons why good customer service is important for Keypeople.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two reasons why employment contracts are used by businesses.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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5
(d) Identify and explain two stages in the recruitment process of the manager’s job for the
manufacturing business.
Stage 1: ....................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Stage 2: ....................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think Rachel should expand Keypeople? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

6
3 HPT makes frozen food products. The Finance Director wants to improve HPT’s cash flow position.
Table 1 is an incomplete cash flow forecast for the next 3 months. The Finance Director thinks HPT
should not use expensive packaging. He is also worried that new Government health & safety laws
will not benefit the company and will only add to its costs.
Table 1: Cash flow forecast ($000’s)
Month 1 Month 2 Month 3

Opening balance (50 000) (30 000) (40 000)
Cash inflows 200 000 180 000 200 000
Cash outflows:
Wages 60 000 60 000 60 000
Packaging 20 000 20 000 20 000
Raw materials 45 000 55 000 45 000
Fixed costs 55 000 55 000 55 000
Total cash X 190 000 180 000
outflows
Net cash flow 20 000 Y 20 000
Closing balance (30 000) (40 000) (20 000)
Note: numbers in brackets are negative.
(a) Identify two fixed costs that HPT might have.
Fixed cost 1: ..............................................................................................................................
Fixed cost 2: ..........................................................................................................................[2]
(b) Calculate the following.
Month 1 total cash outflows (X): ................................................................................................
...................................................................................................................................................
Month 2 net cash flow (Y): ........................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two benefits to HPT of having a cash flow forecast. You should refer to
Table 1 in your answer.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/M/J/14
7
(d) Identity and explain two reasons why packaging might be important for HPT.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The Finance Director is worried that new Government health & safety laws will not benefit the
company and will only add to its costs. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
4 The economy of country U is in recession. The Government has cut interest rates to attract
businesses to set up in country U. JWR is a large multinational energy company. JWR may decide
to open a power station in country U. The Government thinks that opening a new power station will
create many external benefits. Some pressure groups do not want companies like JWR operating
in their country.
(a) Identify two features of a recession.
Feature 1: ..................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two effects of a cut in interest rates on businesses like JWR.
Effect 1: .....................................................................................................................................
...................................................................................................................................................
Effect 2: .....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two actions that pressure groups could use to influence JWR’s decision.
Action 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Action 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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9
(d) Identify and explain two external benefits as a result of opening a new power station in
country U.
External benefit 1: .....................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that the Government of country U should try to attract multinational businesses?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

10
5 Callow is a large retail business based in country X. ‘Our employees are an important stakeholder’,
said the Managing Director. ‘To make sure we stay profitable we need to motivate them.’ Callow
trains all of its shop employees by using off the job training.
Fig. 1: Callow Organisation Structure
Managing Director
HR Director Finance Director Operations Director Marketing Director
West Region South Region North Region East Region

Manager Manager Manager Manager
Shop Managers × 6
Department Managers × 4
Supervisors × 2
Sales Assistants × 8
(a) Identify two stakeholder groups, other than employees.
Stakeholder group 1: .................................................................................................................
Stakeholder group 2: .............................................................................................................[2]
(b) Identify two functions of management that each shop manager will have to perform.
Function 1: ................................................................................................................................
Function 2: ............................................................................................................................[2]
(c) Identify and explain two features of Callow’s organisational structure.
Feature 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/M/J/14
11
(d) Identify and explain two possible methods that Callow could use to improve the motivation of
its employees.
Method 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think it is a good idea for Callow to use off the job training for all its shop employees?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
© UCLES 2014 0450/11/M/J/14

12
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© UCLES 2014 0450/11/M/J/14

* 8 7 8 4 9 4 8 5 5 1 *

1 hour 45 minutes

DC (HB (RJ/JG)) 79722/2

2
1 LEK owns 80 electrical shops. It sells products such as cell (mobile) phones and televisions. The
Marketing Director believes offering customers a choice of products helps LEK to be competitive.
LEK must use suitable ways to communicate with its customers. LEK’s directors are planning a
takeover of a competitor. This competitor owns 40 shops and operates in the same 4 regions as
LEK.
Fig. 1: LEK organisational chart
Managing Director
HR Finance Director Operations Director Marketing Director

Director
Region 1 Region 2 Region 3 Region 4

Shop Managers Shop Managers Shop Managers Shop Managers

×20 ×20 ×20 ×20
(a) What is meant by ‘span of control’?
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two factors (other than offering choice and having good communication) which could
help make LEK more competitive.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two benefits to LEK of having an organisational chart.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2014 0450/12/M/J/14
3
(d) Identify and explain two suitable methods of communication that LEK could use to
communicate with its customers.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that the takeover of the competitor would benefit LEK? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]

4
2 Cutter is a family owned private limited company. It manufactures a luxury brand of coats. In
2013 sales revenue increased by $3m and retained profits also increased. ‘The marketing mix is
working’ said the Marketing Director. Cutter’s Operations Director thinks that batch production is
still the right method of production to use, but he cannot decide whether on the job or off the job
training is better for the business.
(a) What is meant by ‘retained profit’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible advantages to Cutter of being a private limited company.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible advantages to Cutter of using batch production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/M/J/14

5
(d) Identify and explain two possible elements of a suitable marketing mix for Cutter’s products.
Element 1: .................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Element 2: .................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think it is better for Cutter to use on the job or off the job training? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

6
3 SENG manufactures cameras. Last year its market share increased by 2% to 18%. Production is
capital intensive. This allows SENG to use lean production methods such as just-in-time. Cameras
have a short product life cycle. SENG spends $200m each year on extension strategies. The
Marketing manager thinks that an increase in market share will lead to higher profits.
(a) What is meant by ‘capital intensive?’
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why cameras might have a short product life cycle.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible advantages to SENG of using lean production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/M/J/14

7
(d) Identify and explain two possible extension strategies that SENG could use for one of its
types of camera.
Strategy 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Strategy 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that an increase in market share will always lead to higher profits for SENG?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
4 The Government of country B plans to build a new airport. A Government spokesperson said:
‘There will be external costs, but I think there will be more benefits for the local community. We
have to support businesses such as airlines in the private sector’. RU Air is one of the world’s most
profitable airlines. RU has announced plans on its website that it will operate flights to and from
country B in the future. RU is a public limited company.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two ways the Government might support RU Air and other private sector business
activity (other than by building a new airport).
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two benefits to RU Air of high profits.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/M/J/14

9
(d) Identify and explain two benefits for RU Air of having a website.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you agree that there are likely to be more advantages for the local community from the
new airport than disadvantages? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

10
5 Anyshade manufactures a range of paints. It uses flow production. The Finance manager has
produced a cash flow forecast as the business wants to arrange an overdraft with its bank.
The Finance manager believes that reducing prices is the best way to increase sales revenue.
Anyshade’s paints are well known for quality.
July August September

Opening balance (9 000) 6 000 Y
Cash inflows:
Cash sales 90 000 30 000 50 000
Cash from debtors 50 000 80 000 70 000
Total cash inflows 140 000 110 000 120 000
Cash outflows:
Fixed costs 70 000 70 000 70 000
Wages 20 000 18 000 19 000
Raw materials 35 000 30 000 30 000
Total cash outflows 125 000 118 000 119 000
Net cash flow X (8 000) 1 000
Closing balance 6 000 (2 000) (1 000)
(a) What is meant by an ‘overdraft’?
...................................................................................................................................................
...............................................................................................................................................[2]
July net cash flow (X): ...............................................................................................................
...................................................................................................................................................
September opening balance (Y): ..............................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to Anyshade of using flow production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/M/J/14
11
(d) Identify and explain two possible reasons why Anyshade has cash flow problems.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Anyshade’s Finance manager believes that reducing prices is the best way to increase sales
revenue. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
© UCLES 2014 0450/12/M/J/14

12
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© UCLES 2014 0450/12/M/J/14

* 1 7 8 4 7 1 5 3 4 7 *

1 hour 45 minutes

DC (HB (RJ/JG)) 79717/2

2
1 Tim is the Managing Director of TPW, which is a successful accountancy business. It For
prepares the accounts for small and large businesses and personal customers. Tim believes Examiner’s
in a democratic management style. Employees are paid by time rate. Tim plans to change Use
how employees are rewarded. Tim wants to invest in new information technology in the office.
He is not sure that this will help the business increase its profits.
Fig. 1: TPW organisational chart
Managing Director
Large business Small business Personal customer Office administration

manager manager manager manager
Accounts clerks Accounts clerks Accounts clerks Office workers

×7 ×7 ×7 ×3
(a) What is meant by ‘paid by time rate’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
The span of control for the Managing Director: ............................................................ [1]
The number of levels in the hierarchy: ......................................................................... [1]
(c) Identify and explain two advantages to TPW of Tim’s democratic management style.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2014 0450/13/M/J/14

3
(d) Identify and explain two methods (other than time rate) that TPW could use to reward its For
employees. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that introducing new information technology in the office will help improve
the profitability of TPW? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

4
2 Karl owns a fabric (cloth) wholesale business. He supplies a large range of fabrics to many For
small businesses in country G. Karl employs unskilled workers in his warehouse. He offers Examiner’s
2 months credit to all customers. Despite being a profitable business, Karl is worried about Use
his cash flow for the next 3 months.

Opening balance 0 X 0
Cash inflows:
Cash sales 10 40 10
Cash from debtors 38 48 58
Total cash inflow 48 88 68
Cash outflows:
Wages 10 10 10
Payment for stock 38 48 60
Fixed costs 15 15 15
Total cash outflow 63 73 Y
Net cash flow (15) 15 (17)
Closing balance (15) 0 (17)
(a) What is meant by ‘net cash flow?’
..........................................................................................................................................
...................................................................................................................................... [2]
Month 2 opening balance (X): ..........................................................................................
..........................................................................................................................................
Month 3 total cash outflow (Y): ........................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible advantages to Karl of employing unskilled workers.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2014 0450/13/M/J/14
5
(d) Identify and explain two possible advantages to small business customers of buying For
from a wholesale business such as Karl’s. Examiner’s
Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Explain two ways that Karl could use to improve his cash flow. Recommend which one
he should use. Justify your answer.
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

6
3 ABC manufactures a range of cars. ABC plans to build a new type of car at its factory in For
country X. This will expand production capacity at the factory by 100 000 cars per year. ABC Examiner’s
hopes to benefit from economies of scale, which should help to reduce the break-even level Use
of output. ‘It’s good that we have motivated workers’ said the Operations manager. ABC plans
to start exporting some of its cars.
(a) What is meant by ‘break-even level of output’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two factors which could influence employee motivation at ABC.
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two economies of scale that ABC could benefit from.
Economy of scale 1: .........................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Economy of scale 2: .........................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
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7
(d) Identify and explain two possible problems for ABC of increasing production. For
Examiner’s
Problem 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think it is a good idea for ABC to start exporting some of its cars? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

8
4 Kyle is an entrepreneur. He plans to buy a Frydays franchise. Frydays is a leading fast For
food (take-away) business. Each franchise costs $100 000. Frydays would provide some Examiner’s
promotion. ‘I only need to find the right location, hire some people and raise the finance’ said Use
Kyle. ‘I am certain to make a profit.’
(a) What is meant by an ‘entrepreneur’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two methods of promotion Frydays might use.
Method 1: .........................................................................................................................
Method 2: ..................................................................................................................... [2]
(c) Identify and explain two factors that would affect Kyle’s choice of source of finance.
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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9
(d) Identify and explain two factors that Kyle should consider when choosing a suitable For
location for his business. Examiner’s
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that owning a franchise would mean Kyle is ‘certain to make a profit’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

10
5 The economy of country U is enjoying an economic boom. Many new businesses are being For
set up in country U. There are many sources of external finance available for new businesses. Examiner’s
Use
GGC is a multinational mining company. Its directors have agreed to form a joint venture with
another mining company that is already based in country U. All mine workers are members
of a trade union.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
...................................................................................................................................... [2]
(b) Identify two possible advantages to mine workers of being members of a trade union.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible advantages to GGC’s management of its mine
workers being members of a trade union.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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11
(d) Identify and explain two sources of external finance that GGC might use when setting For
up a new mine. Examiner’s
Use
Source 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Source 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think it is a good idea for GGC to form a joint venture in country U? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
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* 4 6 8 8 3 8 7 5 2 5 *

1 hour 30 minutes

DC (NF/AR) 97916/2
2
1 Gomez is the manager of a small computer repair business. Table 1 shows some costs and prices
for his business. As it is a competitive market, Gomez knows it is important to maintain customer
loyalty and revenue. Gomez knows that a lower break-even point would help improve profits. He
thinks the best way to lower the break-even point is to raise prices.
Table 1: Cost and price information
Price per customer $30

Variable cost per customer $20
Average number of customers per month 140
Monthly fixed costs $1000
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(c) Using the information in Table 1, draw a break-even chart for Gomez’s business. [4]
5000
4500
4000
3500
3000
costs and revenue
($ per month) 2500
2000
1500
1000
500
0
0 25 50 75 100 125 150
number of customers per month
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3
(d) Identify and explain two methods that Gomez could use to maintain customer loyalty.
Method 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Gomez thinks the best way to lower the break-even point is to raise prices. Do you agree?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]

4
2 Country S is enjoying an economic boom. During this time, businesses have increased their profits
and unemployment has fallen. The only problem is inflation. All Active is a private limited company.
It owns 20 sport and fitness clubs in country S. The Managing Director said: ‘This is a good time
to expand by opening 5 more clubs. Finding the right locations is important. We will need to recruit
more employees.’ He cannot decide whether it would be an advantage for All Active to become a
public limited company.
(a) Identify two stages of the recruitment process.
Stage 1: ....................................................................................................................................
Stage 2: ............................................................................................................................... [2]
(b) What is meant by an ‘economic boom’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(c) Explain how falling unemployment might affect All Active.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [4]
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5
(d) Identify and explain two factors that All Active should consider when deciding on the location
of the new clubs.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Consider the advantages and disadvantages for All Active of being converted to a public
limited company. Do you think All Active should become a public limited company? Justify
your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]

6
3 Si and Ramon are friends. They want to set up a photography business. They would take pictures
at weddings, birthdays and other special events. The business will be a partnership. Based on their
primary market research, Si believes there is enough demand. Ramon has produced a business
plan which shows they need $8000 for a shop and $4000 for equipment. They plan to spend $500
on promotion, but cannot agree on the best method to use.
(a) What is meant by a ‘partnership’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two methods of primary market research that Si and Ramon might have used.
Method 1: ..................................................................................................................................
Method 2: ............................................................................................................................. [2]
(c) Identify and explain two possible sources of finance that they could use to obtain the
equipment.
Source 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Source 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [4]
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7
(d) Identify and explain two advantages to Si and Ramon of having a business plan.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Consider two methods of promotion that would be suitable for Si and Ramon to use. Which of
these two methods would be the most appropriate? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]

8
4 Javid is a company that manufactures a range of luxury chocolates using batch production. Over
the past year, profit has fallen due to increased competition. In order to cut costs, the Finance
Director has suggested the company introduces new technology into the production process. The
Human Resources Director is not sure that workers would benefit from the introduction of new
technology.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two advantages (other than cutting costs) to the company of using new technology.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Advantage 2: ............................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two reasons why the quality of chocolates might be important to this
company.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 0450/11/M/J/15

9
(d) Identify and explain two problems that a fall in profit might cause for the company.
Problem 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Problem 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that the introduction of new technology would benefit Javid’s workers? Justify
your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
© UCLES 2015 0450/11/M/J/15

10
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11
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12
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© UCLES 2015 0450/11/M/J/15

* 8 8 0 1 6 8 8 3 8 1 *

1 hour 30 minutes

DC (NF/AR) 97917/2
2
1 PJK makes a range of luxury sports watches. Each watch is handmade by skilled workers. Quality
assurance is important. The Operations Director has been looking at costs and prices as he
wants to do a break-even analysis. This data is shown in Table 1. He is planning to invest in new
technology to automate parts of the production process. The Operations Director thinks this is the
best way to improve profitability.
Table 1: Costs and revenue ($)
Price per watch $100

Variable cost per watch $50
Annual sales 6000
Annual fixed costs $200 000
(a) What is meant by ‘quality assurance’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two ways in which break-even analysis might be helpful to PJK.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
.............................................................................................................................................. [2]
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3
(c) Using the information in Table 1, draw a break-even chart for PJK on Figure 1. [4]
Figure 1
600 000
550 000
500 000
450 000
400 000
350 000
costs and revenue
($ per year) 300 000
250 000
200 000
150 000
100 000
50 000
0 1000 2000 3000 4000 5000 6000 7000 8000

output (units)

4
(d) Identify and explain two advantages to PJK of having skilled workers.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that investing in new technology is the best way to improve profitability at PJK?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
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5
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6
2 Alkin is a multinational company. It manufactures breakfast food products including many leading
brands of cereal. Alkin plans to start selling in country Z, which is a fast-growing market. Alkin
plans to form a joint venture with a local business, based in country Z. ‘Effective communication
will be important to our success but I think there are many advantages in expanding this way’ said
Alkin’s Managing Director. The Government of country Z is worried about the effect of multinational
companies like Alkin on consumers.
(a) What is meant by a ‘multinational company’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) What is meant by a ‘brand’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two reasons why effective communication might be important for Alkin.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 0450/12/M/J/15

7
(d) Identify and explain two advantages to Alkin of using a joint venture to expand into country Z.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2 ..............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that the Government in country Z is right to be worried about the effect of
multinational companies such as Alkin on consumers? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]

8
3 Mabel wants to set up her own hairdressing business. She will need to build good customer
relationships. She has done some secondary market research to find out possible demand and
what methods of promotion to use. She has decided to buy her inventory (stock) from a wholesaler.
Mabel is now looking for the right location for her business. She thinks that location will be more
important than price charged to the success of her business.
(a) Identify two ways that a business could build good customer relationships.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
.............................................................................................................................................. [2]
(b) What is meant by ‘secondary market research’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two methods of promotion (other than promotional pricing) that Mabel
might use.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 0450/12/M/J/15

9
(d) Identify and explain two possible disadvantages to Mabel of buying her inventory from a
wholesaler.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that the right location is more important than the prices she charges to the
success of Mabel’s business? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]

10
4 A2Z is a small but successful airline company in country B, providing flights for business people.
The management of A2Z wants the business to expand. It will have to buy more aeroplanes and
recruit more airline pilots. The Human Resources manager has produced a job description for
the pilots. She is now ready to advertise for the new pilots. She believes the best way for A2Z to
motivate its pilots is to use financial rewards.
(a) Identify two possible reasons why A2Z might want to expand.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two factors that A2Z should consider when choosing a source of finance to buy more
aeroplanes.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two advantages to A2Z of producing a job description.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 0450/12/M/J/15

11
(d) Identify and explain two suitable ways A2Z could use to advertise the new jobs.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that using financial rewards is the best way for A2Z to motivate its pilots? Justify
your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
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12
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© UCLES 2015 0450/12/M/J/15

* 2 6 2 9 1 5 6 4 1 7 *

1 hour 30 minutes

DC (NH/SG) 97918/3
2
1 GK Hotel is a small hotel in the city centre. It has 15 rooms. Most of its customers are tourists. Last
year the number of customers fell due to changes in consumer spending patterns and increased
competition. The Marketing manager believes GK must attract customers from different market
segments if the hotel is to increase its profits. His plan is to improve the GK website. He is not sure
whether he should change the cost plus pricing method he uses.
Table 1: Cost and price data for GK Hotel
Average price per room $40

Variable cost per room $20
Total fixed costs per month $4000
Average number of rooms booked and paid
250
for per month
(a) What is meant by ‘market segment’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two reasons why consumer spending patterns might change.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
© UCLES 2015 0450/13/M/J/15

3
(c) Using the information in Table 1, draw a break-even chart for GK Hotel on Figure 1. [4]
Figure 1
10 000
9000
8000
7000
6000
costs and
revenue
5000
($ per month)
4000
3000
2000
1000
0 50 100 150 200 250 300

number of rooms booked per month

4
(d) Identify and explain two benefits to GK Hotel of having a website.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that cost plus pricing is the best pricing method for GK Hotel to use? Justify your
answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
© UCLES 2015 0450/13/M/J/15

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6
2 Camille is an entrepreneur. She owns a popular and successful hairdressing business. Camille
wants to expand her small business. Camille currently employs 5 part-time workers, but she will
have to recruit 3 more workers who will need on-the-job training. She thinks that her laissez-faire
leadership style will have to change as her business grows.
(a) Identify two ways to measure the size of a business (other than number of employees).
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two characteristics of a successful entrepreneur.
Characteristic 1: ........................................................................................................................
...................................................................................................................................................
Characteristic 2: ........................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to Camille of employing part-time workers.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2015 0450/13/M/J/15

7
(d) Identify and explain two problems for Camille of using on-the-job training.
Problem 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Problem 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Camille thinks that her laissez-faire leadership style will have to change as her business
grows. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
3 Bowland manufactures bicycles from components purchased from suppliers. The production
method makes use of specialisation. The Finance manager said: ‘It has been a successful year
because profit is up. However cash flow is still negative. Trade receivables (debtors) have increased
and we have purchased a lot of new equipment.’ Bowland’s management believes that improving
quality has been the most important reason why bicycle sales have increased.
(a) What is meant by ‘specialisation’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two ways (other than profit) that Bowland could use to measure its success.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two reasons why cash flow is important to Bowland.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 0450/13/M/J/15

9
(d) Identify and explain two ways in which Bowland could improve its cash flow.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Bowland’s management believes that improving quality has been the most important reason
why sales have increased. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

10
4 BRZ sells outdoor clothing, such as waterproof trousers and coats, in country X. It imports most
of its inventory (stock) from low wage countries. ‘Globalisation has changed how we do business.
It offers many opportunities but I have to consider import quotas and exchange rates’ said the
Operations Director. BRZ tries to act in an ethical way with all its stakeholders. The Operations
Director is not sure if it is possible for BRZ to be both ethical and profitable.
(a) What is meant by an ‘import quota’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by ‘inventory (stock)’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Explain how a depreciation in the value of country X’s currency might affect the profits of
BRZ.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
© UCLES 2015 0450/13/M/J/15

11
(d) Identify and explain two opportunities that globalisation might offer BRZ.
Opportunity 1: ...........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Opportunity 2: ...........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think it is possible for companies such as BRZ to be both ethical and profitable?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
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*6739072195*

1 hour 30 minutes


06_0450_11_2016_1.24
2
1 EDGE makes mobile (cell) phones. It operates in a competitive market. The Marketing manager
believes that because EDGE is good at maintaining customer loyalty demand for its phones is price
inelastic. Its best selling product, Z, is near the end of its product life cycle. The Marketing manager
has to decide whether to spend money on developing new products or use extension strategies
for product Z.
T
X
15%
20%
Z Y
40% 25%
Total quantity sold: 800 000
Fig. 1: EDGE – quantity sold by product type in 2015
(a) What is meant by ‘customer loyalty’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the quantity of product Z sold in 2015.
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Explain the possible effect on EDGE if the prices of its products are reduced.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_11_2016_1.24

3
(d) Identify and explain two advantages to EDGE of developing new products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two extension strategies that EDGE could use for product Z. Recommend which one
of the two strategies it should choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_11_2016_1.24 [Turn over

4
2 Bushall is a farm. This primary sector business grows award-winning fruits such as pineapples and
bananas. Bushall has 10 full-time and 50 part-time employees. All part-time job vacancies are
advertised on its website. The Government has introduced legal controls for employment including
a minimum wage of $8.50 per hour and a limit on the number of hours an employee can work each
week. The farm manager has said to Bushall’s owners: ‘Taylor’s theory of motivation might not
work. Our team of employees enjoy what they do. These laws are not good for our employees or
our business!’
(a) Identify two examples (other than farming) of business activity in the primary sector.
Example 1: ........................................................................................................................
Example 2: ........................................................................................................................ [2]
(b) Identify two ways (other than its website) that Bushall could use to advertise job vacancies.
Way 1: ...............................................................................................................................
Way 2: ............................................................................................................................... [2]
(c) Identify and explain two possible reasons why ‘Taylor’s theory of motivation might not work’
at Bushall.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_11_2016_1.24

5
(d) Identify and explain two advantages to Bushall of having part-time employees.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that the new legal controls for employment will benefit Bushall’s employees?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_11_2016_1.24 [Turn over

6
3 Rafiq is the Operations manager at a small factory. The business makes a range of soft drinks
using batch production. Last year Rafiq successfully introduced just-in-time inventory control, based
on an idea from one of the 40 employees. As the business is planning to expand, Rafiq thinks it
would be a good idea to change to flow production.
Table 1: Income statement for 2015 ($000)
Revenue X
Cost of sales 360
Gross profit 240
Expenses Y
Profit 120
Retained profit 100
(a) What is meant by ‘cost of sales’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Refer to Table 1. Calculate:
X ........................................................................................................................................
Y ........................................................................................................................................ [2]
(c) Identify and explain two possible reasons why profit is important for this business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_11_2016_1.24

7
(d) Identify and explain two advantages to this business of using just-in-time inventory control.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think this business should change to flow production? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_11_2016_1.24 [Turn over

8
4 Nuwan is a sole trader. He has a specialist sports shop selling a wide range of cricket and tennis
products. His 3 employees are trained to provide good customer service. Nuwan is pleased the
economy is growing but he is worried that interest rates might be increased. He believes his small
business has advantages compared to large retailers. Nuwan would like to improve profit margins
and thinks the best way to do this is to reduce costs.
(a) What is meant by a ‘sole trader’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible features which show that the economy is growing.
Feature 1: .........................................................................................................................
Feature 2: ......................................................................................................................... [2]
(c) Identify and explain two ways in which an increase in interest rates might affect Nuwan’s
business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_11_2016_1.24

9
(d) Identify and explain two advantages that Nuwan’s business might have compared to large
retailers.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that the best way for Nuwan to improve profit margins is to reduce costs? Justify
your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_11_2016_1.24

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11
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© UCLES 2016 06_0450_11_2016_1.24


*0937646292*

1 hour 30 minutes


06_0450_12_2016_1.17
2
1 Saltan makes a range of cars. The level of inventory is too high so it plans to decrease production
at its factory. Employees were told the business needs to reduce the size of its workforce as
competition is increasing. The trade union is not happy that 360 of the 1200 skilled full time
employees at Saltan will be made redundant. A trade union spokeswoman said: ‘Saltan should
reduce the number of hours of every employee rather than reduce the number of jobs.’ Saltan’s
Operations Director is considering ways to increase efficiency in the factory.
(a) What is meant by a ‘trade union’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two situations (other than increasing competition) when a business might have to
reduce the size of its workforce.
Situation 1: ........................................................................................................................
...........................................................................................................................................
Situation 2: ........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible problems for Saltan of having a high level of inventory.
Problem 1: ........................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_12_2016_1.17

3
(d) Identify and explain two ways Saltan could improve efficiency.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Saltan should reduce the number of working hours for every employee rather
than reduce the number of jobs? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_12_2016_1.17 [Turn over

4
2 F&G is a leading fashion retailer. It has 20 shops in country C. The business uses market
segmentation. Its target market is men aged between 25 and 40 years old. The Marketing Director
has been looking at the marketing data shown in Table 1. She is worried that the amount the
business spends on marketing is not cost effective. She would like to close down all F&G shops
and just use e-commerce.
Table 1
Year Total value of the men’s F&G’s market share F&G’s marketing budget
clothing market
2015 $500m 15% $25m
2016 $700m 12% $40m
(a) What is meant by ‘marketing budget’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the value of F&G’s revenue in 2016.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two benefits of market segmentation to F&G.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_12_2016_1.17

5
(d) Identify and explain two possible reasons why the amount F&G spends on marketing might
not be cost effective.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think F&G should close down all its shops and just use e-commerce? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_12_2016_1.17 [Turn over

6
3 Alex and Raul are business partners. They started a bicycle repair business with their own savings
as the bank would not give them a loan. Raul does most of the repair work, while Alex manages
the accounts. Alex is surprised that the business has made a small profit in the first year. ‘We can
use this profit to expand. I don’t know why people think we would benefit from having a business
plan. Much of the demand for our repair business comes from our friends who own bicycles.’
Table 2: Extract from balance sheet as at 31 March 2016 ($)
Non-current assets 3000

Current assets 2500
Current liabilities 2000
Non-current liabilities 1500
(a) What is meant by ‘non-current liabilities’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the working capital.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why working capital is important to Alex and Raul’s
business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_12_2016_1.17

7
(d) Identify and explain two benefits to Alex of having a business partner.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Alex and Raul need a business plan for the business to be successful in the
future? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_12_2016_1.17 [Turn over

8
4 KLG is based in country X. It specialises in making electrical parts which it sells to washing machine
manufacturers in country X. The Managing Director is planning to relocate to country Y, which is
a low-cost country. She said: ‘This will allow us to pay employees low wages for working long hours
as there are few legal controls on employment and health and safety. KLG cannot be both ethical
and profitable. Changes in exchange rates and import tariffs might cause us problems when we
start exporting.’
(a) What is meant by ‘import tariff’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two benefits to KLG of specialisation.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
........................................................................................................................................... [2]
(c) Explain how a change in exchange rates might affect KLG when exporting.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_12_2016_1.17

9
(d) Identify and explain two factors (other than exchange rates and import tariffs) that KLG should
consider when deciding where to relocate.
Factor 1: ...........................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) The Managing Director believes that ‘KLG cannot be both ethical and profitable.’ Do you agree?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_0450_12_2016_1.17

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© UCLES 2016 06_0450_12_2016_1.17

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© UCLES 2016 06_0450_12_2016_1.17


*0759858583*

1 hour 30 minutes


06_0450_13_2016_1.21
2
1 GCN makes a wide range of clothing including shirts and trousers for men and women. Its small
factory employs 75 skilled workers. The Operations manager thinks employees enjoy working at
the factory as few leave each year. He said: ‘Who needs to offer financial bonuses when I can use
Herzberg’s theory to motivate employees?’ He would like to improve efficiency in the factory as he
thinks this is the best way to increase GCN’s low level of profit. He is not sure whether to introduce
new technology into the production process.
(a) What is meant by a ‘financial bonus’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two motivational theories (other than Herzberg’s).
Theory 1: ..........................................................................................................................
Theory 2: .......................................................................................................................... [2]
(c) Identify and explain two ways in which GCN could use Herzberg’s theory to motivate its
employees.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_13_2016_1.21

3
(d) Identify and explain two possible problems for GCN of introducing new technology.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think improving efficiency is the best way for GCN to increase its profit? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2016 06_0450_13_2016_1.21 [Turn over

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2 The Government in country Y wants to encourage more secondary sector business activity to help
reduce unemployment. It has announced a reduction in taxes and plans to remove some legal
controls over business activity. Kasper Construction is a multinational company based in country
X which wants to expand. It plans to build a brick-making factory in country Y if it can find a suitable
location. Some pressure groups are against this plan as Kasper Construction has a bad reputation
for environmental damage.
tertiary sector
25%
primary sector
60%
secondary sector
15%
Total number of people employed in 2015 = 20 000 000
Fig. 1: Employment in country Y
(a) What is meant by the ‘primary sector’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the number of people employed in secondary sector businesses in country Y.
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two benefits to Kasper Construction of a reduction in taxes.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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5
(d) Identify and explain two factors (other than taxes) that Kasper Construction should consider
before making a location decision.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that the Government of country Y should encourage Kasper Construction to locate
in country Y? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2016 06_0450_13_2016_1.21 [Turn over

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3 Jenson Travel (JT) sells a wide range of holidays aimed at the mass market. The holidays are sold
through its 350 shops in country F. It has agreed to buy another company which specialises in
activity holidays such as skiing. This takeover means that JT will have 50 extra shops and will
increase its market share to 40%. The takeover could reduce JT’s costs by $35m each year. A
summary of JT’s accounting information for 2016 is shown in Table 1. The Finance Director thinks
shareholders and customers will benefit from the takeover.
Table 1: Summary of accounting information
Non-current assets $500m
Current assets $324m
Current liabilities $270m
Non-current liabilities $1000m
Profit margin 16%
Return on Capital Employed (ROCE) 8%
(a) What is meant by ‘non-current assets’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the current ratio using the information in Table 1.
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which shareholders might use JT’s accounts.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_0450_13_2016_1.21

7
(d) Identify and explain two ways in which the takeover might help JT reduce costs.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that customers will benefit from the takeover? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2016 06_0450_13_2016_1.21 [Turn over

8
4 After 20 years working for a bank, Luis has savings of $5000. He wants to start up his own business
selling and repairing mobile (cell) phones. It is a competitive market. Luis has decided not to buy
a franchise for $4500 as he thinks it is better to operate the business independently rather than be
a franchisee. Based on his primary market research, he will need 15 customers each week to break
even. Luis believes building customer relationships will be important. He plans to use social networks
for promoting his new business.
(a) What is meant by ‘break even’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘primary market research’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why it is important for Luis to build customer relationships.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify and explain two benefits to Luis’s business of using social networks for promotion.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you agree with Luis’s decision not to become a franchisee? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.ukafter
© UCLES 2016 06_0450_13_2016_1.21


*4502995206*

1 hour 30 minutes


06_0450_11_2017_1.2
2
1 QCH is a multinational company which makes a range of luxury cars. Last year it made a profit of
$700m. One of QCH’s objectives is to enter new markets. QCH wants to start producing cars in
country C, a fast growing economy. The Finance Director said: ‘Meeting customer needs is important.
We could form a joint venture or set up our own factory. Both options will be expensive, costing
$800m. I think QCH’s expansion into country C could be good for other businesses there.’
(a) What is meant by a ‘joint venture’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to QCH of having objectives.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why QCH might want to enter new markets.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_11_2017_1.2

3
(d) Identify and explain two factors that QCH should consider when deciding the location of the
new factory.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) The Finance Director thinks QCH’s expansion into country C could be good for other businesses
there. Do you agree? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2017 06_0450_11_2017_1.2 [Turn over

4
2 Josh owns an office cleaning business. He has a number of large and small business customers.
Josh employs 6 full-time cleaners who are all given off-the-job training. Josh believes that using
the latest cleaning equipment increases added value. He said: ‘Customers are happy with the
service. I am always sending text (SMS) messages to workers about additional work.’ Josh has
been looking at his balance sheet. He cannot decide if a bank loan is the best source of finance to
use for new equipment. The new equipment will cost $60 000.
Table 1: Extract from Josh’s balance sheet as at 30 April 2017 ($000)
Current assets 120
Trade receivables 90
Cash X
Current liabilities Y
Net current assets 70
(a) What is meant by ‘trade receivables’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the following values.
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to Josh of using text (SMS)
messages as a method of internal communication.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_11_2017_1.2

5
(d) Identify one advantage and one disadvantage to Josh of using off-the-job training.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a bank loan is the best source of finance for Josh to use for the new equipment?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2017 06_0450_11_2017_1.2 [Turn over

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3 Wilde Soup Stop (WSS) makes a range of soups and hot drinks. It owns 30 shops and has sold
its franchise to 10 other shops in country Z. The Marketing Director said: ‘Results from our focus
group show that being an ethical business is important’. WSS plans to extend its product range to
include curries and cakes. WSS will need to change its brand image. The Marketing Director cannot
decide whether to use sponsorship or newspaper advertising as the main method of promotion.
Fig.1: Existing logo for WSS
(a) Identify two ethical issues for a business.
Issue 1: .............................................................................................................................
...........................................................................................................................................
Issue 2: .............................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by a ‘focus group’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to WSS of selling its franchise.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_11_2017_1.2

7
(d) Identify and explain one advantage and one disadvantage to WSS of changing its brand image.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think WSS should use sponsorship or newspaper advertising as the main method of
promotion? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2017 06_0450_11_2017_1.2 [Turn over

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4 GKK makes plastic bottles for a range of products from food to chemicals. GKK buys its raw materials
from a low-cost country. GKK’s organisational structure is wide with a short chain of command
which allows for delegation. The Government plans to introduce new legal controls to protect the
environment. The Operations manager said: ‘The Government might achieve one of its objectives
but how does it affect GKK? This is a competitive market so prices are important.’ He wants to
improve efficiency and plans to use lean production.
(a) What is meant by ‘chain of command’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two Government economic objectives.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two benefits to GKK of increasing efficiency.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_11_2017_1.2

9
(d) Identify and explain two ways in which new legal controls to protect the environment might
affect GKK.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain one lean production technique. Recommend whether GKK should introduce this
technique. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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*9365041163*

1 hour 30 minutes

MODIFIED LANGUAGE

06_0450_12_2017_1.2
2
1 Cheung owns a small retail shop in the city centre selling fashion clothing for children. As it is a
competitive market, Cheung knows market research is important. Cheung is worried about the
effect of an increase in shop rent on his costs. Cheung said: ‘I will have to pay this higher rent as
it is a good location. I need to increase revenue or reduce other costs.’ Cheung buys all his supplies
from a wholesaler located in a nearby town. He is thinking of buying directly from a clothing
manufacturer in another country.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify what will happen to each of the following when Cheung’s shop rent increases.
Variable cost: ....................................................................................................................
...........................................................................................................................................
Fixed cost: ........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why Cheung thinks the shop is in a good location.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_12_2017_1.2

3
(d) Identify and explain two ways Cheung could increase revenue.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Cheung should change his supplier? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2017 06_0450_12_2017_1.2 [Turn over

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2 LWM uses batch production to make car tyres in 15 different sizes. Last year LWM sold 60 million
tyres including 40 million tyres of its best-selling size. The Finance Director has been looking at
the financial data shown in Table 1. She said: ‘Liquidity is important. I need to do some ratio analysis
to measure business performance. In the previous year our Return on Capital Employed was 33%.’
The directors are worried about increased competition but they cannot decide on the best way for
LWM to respond.
Table 1: Extract of financial data for 2016 ($m)
Revenue 3000
Profit 1000
Capital employed 4000
(a) What is meant by ‘liquidity’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a director might want to measure business performance.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c)
(i) Calculate the Return on Capital Employed (ROCE) for 2016.
................................................................................................................................
................................................................................................................................ [2]
(ii) Explain what this result shows about LWM’s performance.
................................................................................................................................
................................................................................................................................
................................................................................................................................ [2]
© UCLES 2017 06_0450_12_2017_1.2

5
(d) Identify and explain one advantage and one disadvantage to LWM of using batch production.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two ways LWM might respond to increased competition. Recommend which way LWM
should choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2017 06_0450_12_2017_1.2 [Turn over

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3 Five years ago Manisha started making cakes from her home. The cakes are for celebrations, such
as weddings and birthdays. Now she has a small shop and 3 employees. Product quality is important
to her business. Manisha said: ‘I have benefited from the economic boom but I did not expect
demand to increase by 500% each year. Somehow I have managed to cope with higher interest
rates and all the challenges of being a sole trader. The business is profitable at last but I have to
work every day.’ A friend has offered to become Manisha’s business partner.
(a) What is meant by an ‘economic boom’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two factors which might affect demand for Manisha’s products.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways higher interest rates might affect Manisha’s business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_12_2017_1.2

7
(d) Identify and explain two reasons why product quality might be important to Manisha’s business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Manisha should have a business partner? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2017 06_0450_12_2017_1.2 [Turn over

8
4 Steppa is a shoe manufacturer in the private sector. Steppa has 200 employees who all receive a
high hourly wage rate. The Human Resources Director said: ‘We use a democratic leadership style.
Employees are an important stakeholder group. Happy workers are good for business. Revenue
increased by 10% last year.’ The director cannot understand why a high number of workers leave
the business each year. She is looking at other non-financial methods to motivate employees.
(a) What is meant by a ‘stakeholder group’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘private sector’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two effects on Steppa of a high number of workers leaving the business
each year.
Effect 1: .............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Effect 2: .............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_12_2017_1.2

9
(d) Identify and explain two possible advantages for Steppa of using a democratic leadership
style.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two methods of non-financial reward that Steppa might use to increase employee
motivation. Recommend which method Steppa should use. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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*1126903387*

1 hour 30 minutes


06_0450_13_2017_1.17
2
1 CFE makes high quality steel used in shipbuilding. 40% of its output is exported. CFE’s equipment
is old and often breaks down. CFE plans to downsize (reduce) its workforce and 1200 of its 2100
skilled employees could be made redundant. The Managing Director blames reduced demand
because of recession in some economies. A trade union spokeswoman said: ‘Where are the
opportunities from globalisation? This decision will affect many stakeholder groups. There must be
another way for CFE to reduce costs.’
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons (other than reduced demand for steel) that could make it
necessary to downsize the workforce.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two opportunities for CFE of globalisation.
Opportunity 1: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Opportunity 2: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_13_2017_1.17

3
(d) Identify two external stakeholder groups. Explain how each group might be affected by CFE’s
decision to downsize the workforce.
External stakeholder group 1: ...........................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
External stakeholder group 2: ...........................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that reducing the number of employees is the best way for CFE to reduce costs?
...........................................................................................................................................
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© UCLES 2017 06_0450_13_2017_1.17 [Turn over

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2 PCB is a public limited company. It makes a well-known brand of mobile (cell) phones. Pricing is
important as it sells in a competitive market. PCB wants to increase its product range. It plans to
make luxury headphones as the demand for these is growing fast. The Operations Director has to
decide whether PCB should develop its own brand of headphones or take over an existing producer.
For both options, the source of finance would be a share issue.
Table 1: Information on the 2 options
Option 1: Option 2:
Develop own headphones Buy existing producer of
headphones
Cost $12m – $15m $45m
Time needed before product 12 – 18 months 3 months

launch
Other information Need to recruit 1 experienced Existing producer has different

designer leadership style and
organisational structure
(a) What is meant by ‘brand’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two methods of pricing PCB could use for its mobile phones.
Method 1: ..........................................................................................................................
Method 2: .......................................................................................................................... [2]
(c) Identify and explain two advantages to PCB of increasing the range of products it sells.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_13_2017_1.17

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(d) Identify and explain one advantage and one disadvantage to PCB of issuing new shares as
a source of finance.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend which option for increasing the product range the directors should choose.
Justify your answer using the information in Table 1.
...........................................................................................................................................
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© UCLES 2017 06_0450_13_2017_1.17 [Turn over

6
3 C&P Designs is a business partnership between Cory and Phoebe. They make handmade jewellery.
Phoebe works from home making all the jewellery such as necklaces and bracelets. C&P pays for
materials when they are ordered, but allows their customers one month to pay. Cory manages the
accounts and the shop. He is worried about cash flow, as shown in Table 2. Cory said: ‘The bank
will not increase our overdraft. We should ask customers to pay more quickly.’ Phoebe thinks
advertising would increase sales but is worried about legal controls on marketing.
Table 2: Cash flow forecast for C&P ($)
June July August
Cash inflow 480 440 460
Cash outflow:
Raw materials 240 260 240
Shop rent and other costs 200 200 220
Total cash outflows 440 460 460
Net cash flow 40 (20) Y
Opening balance (60) (20) (40)
Closing balance X (40) (40)
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain two ways in which legal controls on marketing might affect C&P.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_13_2017_1.17

7
(d) Identify and explain one advantage and one disadvantage to Cory and Phoebe of being in a
business partnership.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Cory thinks asking customers to pay more quickly is the best way to improve cash flow.
Do you agree? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2017 06_0450_13_2017_1.17 [Turn over

8
4 TUKAN makes a range of soft drinks using flow production. All employees are paid a good wage
but do not receive non-financial rewards. A high percentage of employees leave the business each
year. A common reason given for leaving is that they have no involvement in decision-making. Last
year, TUKAN’s revenue increased by $25m but profit did not increase. The Managing Director said:
‘The economy is in the growth stage of the business cycle. However, we need to improve efficiency.
Lean production methods might help. We need to recruit a new Operations manager who could
have some ideas about this.’
(a) What is meant by the ‘business cycle’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages of flow production.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to TUKAN of introducing non-financial methods of reward.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_0450_13_2017_1.17

9
(d) Identify and explain two possible lean production methods that TUKAN might use to improve
efficiency.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think it is better for TUKAN to use internal recruitment or external recruitment for the
new manager? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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*5344954158*

1 hour 30 minutes

06_0450_11_2018_1.17
2
1 GKA is a food retailer. It has 300 shops located in areas where average consumer incomes are
low. GKA sells a limited range of own-label products including breakfast cereal and toothpaste.
GKA does no promotion or market research. The Managing Director said: ‘Last year our market
share increased to 5%. Profit increased by 40%. Keeping costs low means GKA can offer customers
quality products at low prices.’ GKA is planning to open 100 shops in areas with high average
consumer incomes.The Managing Director must decide whether GKA should change its pricing
strategy (method) as the business expands.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two aims of promotion.
Aim 1:................................................................................................................................
...........................................................................................................................................
Aim 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two methods of market research that GKA could use.
Method 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Method 2:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_11_2018_1.17

3
(d) Identify and explain two ways in which GKA could keep costs low.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think GKA should change its pricing strategy as the business expands? Justify your
answer.
...........................................................................................................................................
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© UCLES 2018 06_0450_11_2018_1.17 [Turn over

4
2 SJD is in the private sector. It makes steel for construction businesses. SJD plans to make 3500
of its 9000 employees redundant. The Operations Director said: ‘Cheap steel imports and high
business tax rates are affecting our business. There are also ethical issues that we must respond
to. The Government should do more to help steel producers. Some of our competitors plan to close
their factories and relocate to other countries. SJD may have to do the same.’
(a) Identify two situations in which downsizing the workforce might be necessary.
Situation 1:.........................................................................................................................
...........................................................................................................................................
Situation 2:.........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible ethical issues that SJD might have to respond to.
Issue 1:..............................................................................................................................
...........................................................................................................................................
Issue 2:..............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible problems for SJD if it decides to relocate its business.
Problem 1:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Problem 2:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_11_2018_1.17

5
(d) Explain how each of the following factors might affect SJD’s business.
High business tax rates:....................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Cheap imports:..................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the Government should help businesses like SJD? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2018 06_0450_11_2018_1.17 [Turn over

6
3 IBH is a family-owned private limited company. It makes a range of shoes for children, using batch
production. It is a competitive market. Like many businesses, IBH needs finance for a number of
reasons. The Finance Director has been looking at some financial data. An extract is shown in
Table 1. Some of the directors would like to expand into the women’s shoe market and want to
know whether IBH’s performance is improving.
Table 1: Extract from financial data for IBH ($000)
2016 2017
Revenue 400 480
Profit 120 120
Non-current liabilities 100 200
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might need finance.
Reason 1:..........................................................................................................................
Reason 2:.......................................................................................................................... [2]
© UCLES 2018 06_0450_11_2018_1.17

7
(c) Identify and explain two possible advantages to IBH of being a private limited company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to IBH of using batch production.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 06_0450_11_2018_1.17 [Turn over

8
(e) Do you think IBH’s performance has improved in 2017? Justify your answer using profit margins.
...........................................................................................................................................
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...........................................................................................................................................
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© UCLES 2018 06_0450_11_2018_1.17

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4 Ben owns a small gardening business, which he started 15 years ago. Ben believes providing a
quality service is important to his success. Ben’s business has a number of stakeholder groups
including 2 full-time and 4 part-time workers who have all been employed by him for a number of
years. Each worker is expected to do any job that Ben orders them to do. All workers are paid an
hourly wage rate. They also receive a bonus if customers recommend the business to other people.
Ben is always thinking about other ways to improve the motivation of his workers.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons why Ben’s business has remained small.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why quality might be important for Ben’s business.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_11_2018_1.17 [Turn over

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(d) Identify and explain two advantages to Ben’s business of having part-time workers.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 06_0450_11_2018_1.17

11
(e) Explain two ways Ben could improve employee motivation. Recommend which way Ben should
choose. Justify your answer.
...........................................................................................................................................
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1 hour 30 minutes

06_0450_12_2018_1.16
2
1 Adele started a dance school five years ago. Every year Adele pays herself a salary and makes
$1000 profit. The school offers a range of dance and exercise classes for children. It is a sole trader
business. Adele believes using the right pricing method is important. Adele wants to expand the
business by opening a second dance school. Based on her business plan, she forecasts that this
will cost $8000. Adele cannot decide whether a bank loan is the best source of finance for this
expansion.
(a) Identify two features of a sole trader.
Feature 1:..........................................................................................................................
...........................................................................................................................................
Feature 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two of the main sections of a business plan.
Section 1:...........................................................................................................................
...........................................................................................................................................
Section 2:...........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why using the right pricing method is important for Adele’s
business.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_12_2018_1.16

3
(d) Identify and explain two location factors that Adele should consider when deciding on a second
school.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that a bank loan is the best source of finance for Adele to use to expand the
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2018 06_0450_12_2018_1.16 [Turn over

4
2 JSF is a business in the private sector. It has 50 production workers who operate machines. JSF
makes a range of household products including towels and bed sheets. Most of the products are
sold to retail businesses that take two months to pay JSF. The business is given two weeks’ credit
to pay its suppliers. The Finance manager has just prepared a cash flow forecast. He said: ‘Cash
outflows are too high. I have already reduced the budget for market research to zero. Training costs
are $1000 per month and cannot be reduced as training is important.’ The Finance manager is
thinking of other ways to improve cash flow.
Table 1: Cash flow forecast for JSF for the period July–September 2017 ($000)
Cash inflows 120 100 90
Cash outflows 150 120 120
Net cash flow X (20) (30)
Closing balance 30 10 Y
(a) What is meant by a cash flow forecast?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the values for X and Y.
X : .......................................................................................................................................
Y: ....................................................................................................................................... [2]
(c) Identify and explain two benefits to JSF of market research.
Benefit 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Benefit 2:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_12_2018_1.16

5
(d) Identify and explain two reasons why training is important to JSF.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two ways (other than lower training costs) that JSF could improve its cash flow position.
Which way do you think JSF should use? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2018 06_0450_12_2018_1.16 [Turn over

6
3 DPC operates 200 takeaway pizza shops. Over 75% of its pizzas are ordered through e-commerce.
The Managing Director thinks 2017 was a successful year. She said: ‘Looking ahead, there are
signs that the economy is growing. However, DPC has a number of challenges. The Government
plans to increase the minimum wage to $5 per hour. DPC has to respond to environmental pressures
as well. Food waste and litter caused by used pizza boxes are problems. Complaints from the local
community about this are too high.’
(a) Identify two ways to measure business success.
Way 1:................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two features of a growing economy.
Feature 1:..........................................................................................................................
...........................................................................................................................................
Feature 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which an increase in the minimum wage could affect DPC.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_12_2018_1.16

7
(d) Identify and explain two advantages to DPC of using e-commerce.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two ways in which DPC could respond to environmental pressures. Recommend which
of the two options it should choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 06_0450_12_2018_1.16 [Turn over

8
4 JKL uses job production to make clocks. JKL buys all its raw materials locally and exports 60% of
its products. The business has high fixed costs. JKL has 30 skilled employees. Many of them work
part-time and delegation is encouraged. All workers receive an email from management every day
to keep them informed about production issues. The Human Resources Director said: ‘I think it is
more cost-effective to try to retain our existing workers rather than to recruit new employees.’ The
Director wants to reduce barriers to communication, as he knows effective communication is
important to help JKL meet its objectives.
(a) Identify two reasons for a business having objectives.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two fixed costs for JKL.
Cost 1:...............................................................................................................................
...........................................................................................................................................
Cost 2:...............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to JKL of using job production.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_12_2018_1.16

9
(d) Identify two possible barriers to communication for JKL. For each barrier, explain how JKL
could reduce or remove it.
Barrier 1:............................................................................................................................
...........................................................................................................................................
How to reduce or remove it:..............................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Barrier 2:............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you agree that it is better for JKL to try to retain existing workers rather than recruit new
employees? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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*1579752302*

1 hour 30 minutes

06_0450_13_2018_1.13
2
1 Rosa is a successful entrepreneur. Her business makes beauty products that she creates including
hand and face creams. She employs 5 production workers and Rosa enjoys being in control of
everything else including design and marketing. Rosa uses social networks for promoting the
business. She said: ‘Increasing added value is important. I am expecting revenue to increase by
300% in 2018. At this rate of growth, I will need a bigger factory. I would like to have customers in
other countries so I hope there are no import quotas!’ Rosa has to decide whether to continue to
expand the business or keep it small.
(a) What is meant by ‘import quota’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Rosa’s revenue was $5000 in 2017. Calculate her expected increase in revenue in 2018.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways Rosa could increase added value.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_13_2018_1.13

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(d) Identify and explain one advantage and one disadvantage to Rosa’s business of using social
networks for promotion.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Rosa should continue to expand her business? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2018 06_0450_13_2018_1.13 [Turn over

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2 ASZ is a public limited company. It makes a range of garden tools such as digging forks and
wheelbarrows using production methods which have not changed for many years. ASZ sells all of
its products to a wholesaler. The Marketing Director is considering changing the channel of
distribution by selling products directly to retailers. The Operations Director has prepared some
revenue and cost data to help make decisions (see Table 1). ASZ is planning to introduce new
technology which will change production methods.
Table 1: Revenue and cost data for Product H for last 6 months
Revenue $35 000
Fixed costs $20 000
Total variable costs X
Total costs $38 000
Profit / (loss) Y
Number of units produced 1000
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X : .......................................................................................................................................
Y: ....................................................................................................................................... [2]
(c) Identify and explain two ways in which ASZ could use cost data to help make decisions.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_13_2018_1.13

5
(d) Identify and explain two ways in which new technology could change production methods at
ASZ.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think ASZ should change its channel of distribution? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2018 06_0450_13_2018_1.13 [Turn over

6
3 AUC is a bank. Its organisational structure has a tall hierarchy and long chain of command. Most
of its customers are small businesses in the tertiary sector. Last year AUC made a loss of $60m.
The new Managing Director has to improve employee motivation as well as reduce costs. 20% of
its 19 000 employees will be made redundant. She said: ‘Maintaining customer loyalty is important.
We will need to inform our customers that 500 of our 2000 retail bank branches will be closed.’
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two examples of business activity in the tertiary sector.
Example 1:.........................................................................................................................
Example 2:......................................................................................................................... [2]
(c) Identify and explain two reasons why maintaining customer loyalty is important to AUC.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_13_2018_1.13

7
(d) Identify and explain two factors that AUC should consider when deciding which employees to
make redundant.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two methods of communication that AUC could use to inform customers about the
planned closures. Recommend which one AUC should use. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2018 06_0450_13_2018_1.13 [Turn over

8
4 CLG owns six airports in country L. The directors want to expand its main airport by building another
runway for aircraft to take off and land. It will cost $300m. Choosing an appropriate source of finance
will be important. The Managing Director said: ‘CLG could offer 50 extra flights a day. There are
environmental pressures including the loss of green spaces and extra pollution. There will be
external benefits as well. I hope the Government allows the new runway to be built.’ Interest rates
increased in 2017.
Table 2: Extract from financial data 2017 ($m)
Shareholders’ equity 240
(a) What is meant by ‘shareholder’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might need short-term finance.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways increased interest rates could affect CLG.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_0450_13_2018_1.13

9
(d) Identify and explain two factors (other than interest rates) that CLG should consider when
choosing a source of finance to pay for the expansion.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Considering the external costs and external benefits, do you think the Government should
allow CLG to build the new runway? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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1 hour 30 minutes


06_0450_11_2019_1.9
2
1 Y2M is a bus operating company in the public sector. One of its objectives is to break even on
every bus route. Most of its competitors are in the private sector. Y2M wants to increase the number
of customers using its buses. The Finance Director has been looking at some cost data shown in
Table1. This is because Y2M plans to review its pricing methods. She is worried other businesses
pay workers a higher wage rate and some of its drivers may leave. She said: ‘To pay the same
wage rate would increase variable cost to $2.20 per passenger per journey.’
Table 1: Cost and price data for one Y2M route
Number of passengers per day 90
Price per passenger per journey $2.50
Fixed costs per week $300
Variable cost per passenger per journey $2
(a) What is meant by ‘break-even’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the revenue per day.
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two objectives Y2M might have if it was in the private sector.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_11_2019_1.9

3
(d) Identify and explain two pricing methods Y2M could use.
Pricing method 1: ..............................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Pricing method 2: ..............................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Y2M should pay its workers the same wage rate as its competitors? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 06_0450_11_2019_1.9 [Turn over

4
2 Kate is an entrepreneur. Two years ago she left her job as a fashion designer at a multinational
company. She started up BBB, a women’s sportswear clothing business. BBB targets a market
segment of high income consumers. BBB’s products are sold in 3 retail shops and also through its
website. Kate said: ‘I saw a gap in the market and took the risk. Obtaining the finance I needed
from the bank was not easy. I enjoy making decisions such as using leaflets to promote the clothes.’
BBB’s revenue target for next year is $500 000.
(a) What is meant by ‘entrepreneur’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why obtaining finance may not be easy for a new business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why Kate decided to start up her own business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_11_2019_1.9

5
(d) Identify and explain two reasons why segmenting the market might help BBB.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that using leaflets is the best way for Kate to promote her products? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 06_0450_11_2019_1.9 [Turn over

6
3 BVC makes a range of paints. It exports 60% of its products. The Managing Director has been
looking at BVC’s cash-flow forecast shown in Table 2. He said: ‘Success is not just about our return
on capital employed.’ The Managing Director is worried about the introduction of new legal controls
to protect the environment. This will mean BVC will have to reduce the number of chemicals that
are used to make paint. He thinks these new legal controls will be bad for business.
Table 2: Extract of cash flow forecast for the period July–September 2019 ($000)

Cash outflow 560 540 580
Net cash flow 40 20 Y
Opening balance X 60 80
(a) What is meant by ‘return on capital employed’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the following values:
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain two reasons why a cash flow forecast might be important for BVC.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_11_2019_1.9

7
(d) Identify and explain two possible problems for BVC when exporting its products.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) The Managing Director thinks the new legal controls to protect the environment will be bad for
business. Do you agree? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 06_0450_11_2019_1.9 [Turn over

8
4 FGH is a private limited company. FGH has a tall hierarchical organisational structure. It is a book
retailer which plans to take over one of its competitors for $800m. If the takeover happens, FGH
would have 6 500 bookshops across 20 countries. FGH’s Managing Director said: ‘We expect to
reduce total costs by $300m each year after the takeover. We will stop all off-the-job training of
employees.’ The Managing Director thinks FGH would benefit from becoming a public limited
company but some of the other directors cannot decide if this is a good idea.
(a) What is meant by ‘off-the-job training’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘total cost’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages of FGH having a tall hierarchical organisational structure.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_11_2019_1.9

9
(d) Identify and explain one advantage and one disadvantage to FGH of becoming a public limited
company.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think FGH should take over the other business? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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1 hour 30 minutes


06_0450_12_2019_1.8
2
1 PLK is a social enterprise which offers training to young people who leave school with no
qualifications. The young people are trained by PLK chefs to prepare food which is sold at local
markets or sporting events. Choosing the right method of promotion is important. The manager of
PLK thinks that to increase profit it is better to raise prices rather than use cheaper food ingredients.
Table 1: Cost and sales information for PLK
Number of meals sold per week 1000
Price per meal $3
Variable cost per meal $2
(a) What is meant by ‘social enterprise’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘fixed costs’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Calculate PLK’s weekly profit.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_12_2019_1.8

3
(d) Identify and explain two methods of promotion PLK might use to increase sales.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you agree with PLK’s manager that to increase profit it is better to raise prices rather than
use cheaper ingredients? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 06_0450_12_2019_1.8 [Turn over

4
2 JNK makes pottery including plates and bowls for the mass market, using batch production. Quality
control is important. JNK has 30 unskilled employees, who are all paid the legal minimum wage.
JNK uses job enrichment to keep workers motivated. Due to an increase in demand, JNK is planning
to replace its old machines with new technology. The Managing Director thinks that some of the
low cost materials purchased by JNK are produced using child labour. One of JNK’s competitors
has recently introduced a new ethical policy.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘job enrichment’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which employees at JNK could be affected by the introduction
of new technology.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_12_2019_1.8

5
(d) Identify and explain two ways (other than new technology) that JNK could use to increase
output.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think JNK should become more ethical? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 06_0450_12_2019_1.8 [Turn over

6
3 REW has won many awards for the design and style of its carpets and rugs. All the wool it uses is
from local suppliers. REW’s objective for this year is to survive and remain in business. The Managing
Director is concerned that the country’s Gross Domestic Product has been falling for some time.
During the recession the Managing Director plans to start selling REW’s products in other countries.
Market research suggests demand would be high.
Table 2: Extract from REW’s accounts
2017 2018
Current ratio 1.5 2
Acid test ratio 1.2:1 1:1
Profit margin 20% 16%
(a) What is meant by ‘Gross Domestic Product’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible effects on businesses from falling Gross Domestic Product.
Effect 1: .............................................................................................................................
...........................................................................................................................................
Effect 2: .............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why REW’s objectives might change over time.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_12_2019_1.8

7
(d) Identify and explain the effect on REW of the changes in the following ratios.
Change in acid test ratio: ..................................................................................................
...........................................................................................................................................
Explanation of effect: ........................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Change in profit margin: ...................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think REW should start selling its products in other countries? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 06_0450_12_2019_1.8 [Turn over

8
4 George has worked in a small flower shop for 10 years. He does not like the autocratic leadership
style of his manager and wants to leave. He will decide whether to start up his own business or
buy a BunchesRUs franchise. The franchise would cost him $5 000 but BunchesRUs would offer
training and support. For either option, George will need both finance and to recruit 2 part-time
employees. George knows building customer relationships will be important to the success of his
business.
(a) What is meant by ‘autocratic leadership style’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible sources of finance George could use.
Source 1: ..........................................................................................................................
...........................................................................................................................................
Source 2: ..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why building good customer relationships might be important
to the success of George’s business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_12_2019_1.8

9
(d) Identify and explain one advantage and one disadvantage to George’s business of having
part-time employees.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think George should buy a BunchesRUs franchise? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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1 hour 30 minutes


06_0450_13_2019_1.9
2
1 EGT produces many teas of different flavours. It uses batch production. Tea leaves, the main raw
materials, are grown by local farmers. Factory space is limited so EGT is unable to use an automated
production line. The old machines used in the factory often break down. One worker is responsible
for quality control. EGT does not benefit from economies of scale. The Human Resources manager
knows that low motivation is a problem with its 80 employees. She plans to use her knowledge of
Maslow’s hierarchy of needs to improve motivation. The owners would like to increase the level of
output but cannot afford to move EGT to a new location.
(a) What is meant by ‘economies of scale’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘quality control’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why EGT uses batch production.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_13_2019_1.9

3
(d) Identify and explain two ways in which the Human Resources manager could use her knowledge
of Maslow’s hierarchy of needs to motivate employees.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend the best way, other than by improving motivation, EGT could use to increase its
level of output. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2019 06_0450_13_2019_1.9 [Turn over

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2 CYN makes a range of children’s toys. CYN’s revenue has increased by 15% a year for the last
10 years. In 2018 CYN’s total revenue was $900 000. The Managing Director said: ‘The toy market
is becoming increasingly competitive in country J. I never expected the rate of growth to be so high.
CYN cannot meet demand and we have decided to stop all marketing promotion for 6 months.’
The Managing Director wants CYN to spend more time on developing new products.
exports
10%
wholesalers
35%
direct to
retailers
55%
Figure 1: Percentage value of CYN’s revenue in 2018
(a) What is meant by ‘wholesaler’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the revenue from selling direct to retailers in 2018.
...........................................................................................................................................
........................................................................................................................................... [2]
© UCLES 2019 06_0450_13_2019_1.9

5
(c) Identify and explain how each of the following might affect CYN’s exports.
Introduction of import quotas in other countries: ..............................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Introduction of import tariffs in other countries: ................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain one advantage and one disadvantage to CYN of developing new products.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 06_0450_13_2019_1.9 [Turn over

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(e) CYN has decided to stop all marketing promotion for 6 months. Do you agree with this decision?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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3 Hashim is an entrepreneur. He plans to start up as a sole trader by opening a small gift shop next
to a popular tourist site. His market research shows that October to June are the months when
sales are likely to be highest. His first business failed within 6 months of start up because of poor
financial planning. This time, Hashim has produced a cash-flow forecast, shown in Table 1, as part
of his business plan. His parents have agreed to give him an interest free loan for the shop rent.
He is hoping to arrange trade credit from suppliers.
Table 1: Cash-flow forecast for Hashim’s business for the period July – October 2019 ($)
July August September October

Cash inflow 80 140 180 240
Cash outflow 300 180 180 180
Net cash flow (220) (40) Y 60
Opening balance 0 (220) (260) (260)
Closing balance X (260) (260) (200)
(a) Identify two features of a sole trader business.
Feature 1: .........................................................................................................................
Feature 2: ......................................................................................................................... [2]
(b) Calculate values for:
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain two factors that Hashim’s suppliers might consider before deciding to offer
him trade credit.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_0450_13_2019_1.9 [Turn over

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(d) Identify and explain two ways in which a business plan might help Hashim’s new business to
be successful.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Hashim should start the new business? Justify your answer using the information
in Table 1.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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4 SWQ owns 200 clothing shops in country A. All inventory is purchased from 3 local clothing
manufacturers. The Marketing Director has to decide whether to change suppliers. SWQ could buy
inventory from country C, a low cost country. He showed the newspaper article, see Figure 2, to
other directors. He said: ‘Look at this newspaper article. We operate in a mass market and our
customers want low prices. Changing suppliers to manufacturers in country C will affect our
stakeholders.’
Factory life in country C

You can see why many retailers are
buying from country C. 15-hour days for
wages of $2 a week. A spokesperson for
one pressure group said: ‘Today I saw
8-year-old children sewing buttons onto
suits and it is legal in this country.’
Figure 2: Newspaper article
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to a business of selling to a mass market.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
© UCLES 2019 06_0450_13_2019_1.9 [Turn over

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(c) Identify two stakeholder groups of SWQ. Explain one possible objective for each stakeholder
group.
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two suitable methods of communication SWQ might use with manufacturers
in country C if it decided to purchase supplies from them.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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(e) Do you think SWQ should start buying its products from country C? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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Cambridge IGCSE

*1512326670*
Paper 1 Short Answer and Data Response May/June 2020

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_11_2020_1.14
2
1 Kara’s business makes wax candles. She sells them to retailers at low prices. She gives retailers
60 days to pay. Kara has to pay her suppliers when raw materials are delivered. Kara used
crowd-funding to set up her business. The bank would not give Kara a loan as she did not have a
business plan. Last year revenue was $50 000. Demand is increasing but Kara is not yet able to
benefit from economies of scale. She said: ‘Cash-flow is a problem. All cash inflows are used to
buy inventory.’
(a) Define ‘crowd-funding’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two economies of scale.
Economy of scale 1...........................................................................................................
...........................................................................................................................................
Economy of scale 2...........................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why a bank might want Kara to produce a business plan before agreeing
to give a loan.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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(d) Explain two factors Kara should consider when deciding whether to increase prices.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think delaying payments to suppliers is the best way for a small business to improve
its cash-flow? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 06_0450_11_2020_1.14 [Turn over

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2 BCK is a multinational company which operates many gold mines. One of BCK’s objectives is to
contribute to sustainable development. The Managing Director said: ‘We value all of our stakeholders.
With 10 000 employees it is important to have the right leadership style. BCK needs well-motivated
employees.’ The Managing Director also thinks that effective communication with suppliers is very
important.
(a) Define ‘multinational company’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two ways of motivating employees.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
(c) State four factors that might affect the leadership style used by a manager.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Factor 3: ...........................................................................................................................
...........................................................................................................................................
Factor 4: ...........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 06_0450_11_2020_1.14

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(d) Explain two ways BCK could contribute to sustainable development.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think using communication methods based on information technology (IT) is the best
way for a large business to communicate with its suppliers? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 06_0450_11_2020_1.14 [Turn over

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3 NWA is a large and profitable airline business. It has grown quickly over the past 10 years and new
aeroplanes have helped to improve its brand image. NWA offers low priced flights for tourists to
50 countries. Sales promotion is an important part of NWA’s marketing mix. The Finance Director
is worried that NWA has a high level of debt as its main source of finance is bank loans. The
organisational chart of NWA has many levels of hierarchy with narrow spans of control.
Table 3.1
Cost and price data for a typical NWA flight (2019)
Fixed costs $2 000
Maximum number of customers 200
(a) Define ‘brand image’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the break-even number of customers for a typical NWA flight. Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible problems for NWA of having a high level of debt.
Problem 1: ........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 06_0450_11_2020_1.14

7
(d) Explain how two methods of sales promotion could increase sales for NWA.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that having many levels of hierarchy is the best type of organisational structure
for a large business? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 06_0450_11_2020_1.14 [Turn over

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4 BMT is a business partnership owned by 2 brothers. The brothers received government support
when they started BMT 6 years ago. BMT now has 30 employees who make high quality watches.
The business tries to achieve lean production. Demand has increased each year and in 2019 BMT
sold 8000 watches. BMT makes some parts for watches and all the other parts are imported. BMT
had to consider a number of factors, including exchange rates, when deciding whether to import
parts for watches.
(a) Identify two reasons why a government might support business start-ups.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(b) State two types of business organisation (other than partnership).
Type 1: ..............................................................................................................................
...........................................................................................................................................
Type 2: ..............................................................................................................................
........................................................................................................................................... [2]
(c) Outline two disadvantages of BMT being a business partnership.
Disadvantage 1: ................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage 2: ................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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9
(d) Explain two ways BMT could achieve lean production.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the exchange rate is the most important factor for a business to consider when
deciding whether to import parts for a high quality product? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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™
Cambridge IGCSE

*7560769113*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_12_2020_1.13
2
1 DWT makes solar panels in country Y. This is a low-cost country which is experiencing rapid
economic growth. DWT’s production method makes use of specialisation. All 120 of DWT’s
employees know that ensuring quality production is important. DWT imports some of its raw materials.
The Government of country Y plans to introduce import tariffs of 50%. DWT’s Managing Director
said: ‘This decision will affect all of our stakeholders. Why do governments introduce trade restrictions
such as import controls?’
(a) Define ‘specialisation’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a government might introduce import controls.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways DWT could try to ensure quality production.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 06_0450_12_2020_1.13

3
(d) Explain one objective of each of the following stakeholder groups of DWT.
Customers: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Pressure groups: ..............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that all businesses will benefit from operating in a country which is experiencing
rapid economic growth? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 06_0450_12_2020_1.13 [Turn over

4
2 MLC makes motorcycles. The Managing Director has been analysing MLC’s costs. An extract of
this information is shown in Table 2.1. To reduce average costs, MLC plans to close its factory and
relocate production to another country. Only 50 of the existing employees will be offered jobs at
the new location. The trade union has been informed. All the new employees will be given either
on-the-job training or off-the-job training. This planned relocation will have an impact on MLC’s
income statement.
Table 2.1
Cost and other information for MLC’s current factory (2019)
Total output (units) 3 000
Total cost $1 200 000
Number of employees 200
(a) Define ‘trade union’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the average cost of one motorcycle. Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) State four features of an income statement.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
...........................................................................................................................................
Feature 3: .........................................................................................................................
...........................................................................................................................................
Feature 4: .........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 06_0450_12_2020_1.13

5
(d) Explain two possible problems for MLC of relocating its operations to another country.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think on-the-job training is a better method of training for a manufacturing business to
use than off-the-job training? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 06_0450_12_2020_1.13 [Turn over

6
3 Kala always wanted to be an entrepreneur. She used to work for a business which downsized its
workforce 5 years ago. She then decided to start up CHL. She produced a business plan which
helped her obtain finance. Kala now designs customised sports clothes for women. Kala sells these
products directly to customers using e-commerce. She has a loyal customer base of 25-40 year
olds. However, Kala is worried about increased competition in this niche market. One idea she has
is to target different market segments.
(a) Define ‘business plan’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might downsize its workforce.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why Kala’s business might need finance.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 06_0450_12_2020_1.13

7
(d) Explain one advantage and one disadvantage to Kala of using e-commerce to sell her products.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think selling to different market segments is the best way for a small business to respond
to increased competition? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 06_0450_12_2020_1.13 [Turn over

8
4 ALB is a large bank. It has 300 branches and 5 000 employees. ALB provides a range of financial
services to its business customers. As it operates in a competitive market, ALB aims to maintain
customer loyalty. Last year ALB’s profit decreased to $3 000m. The Managing Director is analysing
ways to reduce ALB’s costs. She also has to decide how new legal controls over employment
issues might affect the business. The Government plans to improve protection of employees by
changing laws on the minimum wage and health and safety.
(a) Define ‘profit’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two problems of using the number of employees to measure the size of a business.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible ways ALB can try to reduce its costs.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 06_0450_12_2020_1.13

9
(d) Explain two ways ALB could improve customer loyalty.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think changes in legal controls over employment issues will always reduce business
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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Cambridge IGCSE

*8417120905*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_13_2020_1.12
2
1 RGP owns a number of luxury hotels. The directors are planning to open a new hotel with 200
rooms. The hotel’s location will be in the city centre. The Human Resources Director said: ‘One of
my roles is to recruit the 300 employees RGP will need from the local community. I think selecting
new employees with the right personality is more important than their experience. Everyone will
have 6 weeks of induction training.’ She knows that effective communication between employees
and customers will be important to the success of the hotel.
(a) Define ‘induction training’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two ways a business could advertise a new job vacancy.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why effective communication between RGP’s employees and customers
is important.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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(d) Explain one advantage and one disadvantage to RGP of choosing a location in the city centre.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Disadvantage: ...................................................................................................................
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Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think selecting employees with the right personality is more important than their
experience for a tertiary sector business? Justify your answer.
...........................................................................................................................................
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© UCLES 2020 06_0450_13_2020_1.12 [Turn over

4
2 RVC uses batch production to manufacture a large range of products including soap and shampoo.
Many of the products are at different stages of the product life cycle. The Marketing Director has
been reviewing some data for one brand of soap, as shown in Table 2.1. She said: ‘Last year sales
were 80 000 units a week. I want to know the current level of profit and margin of safety.’ The
Marketing Director has to decide on a suitable extension strategy. The choice is between new
packaging or targeting new markets.
Table 2.1
Cost, price and sales data for one brand of RVC’s soap
Selling price $2.50
Fixed costs per week $20 000
Average variable costs $0.90
Number of sales per week 40 000
(a) Define ‘margin of safety’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
Stage 1: ............................................................................................................................
Stage 2: ............................................................................................................................ [2]
(c) Using Table 2.1, calculate the weekly profit. Show your working.
...........................................................................................................................................
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© UCLES 2020 06_0450_13_2020_1.12

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(d) Explain one benefit and one limitation to RVC of using batch production.
Benefit: .............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Limitation: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think targeting new markets is a better extension strategy than new packaging for a
manufacturing business ? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2020 06_0450_13_2020_1.12 [Turn over

6
3 PCS is a multinational company in the private sector. It makes 500 brands of soft drinks which are
sold in plastic bottles. PCS has a large marketing budget for promotion. Many of the countries
where PCS sell its products have introduced legal controls to reduce the amount of litter (trash).
PCS plans to start recycling plastic bottles. PCS’s Operations Manager said: ‘Everything has an
opportunity cost. We want to protect the environment but recycling costs money.’
(a) Define ‘opportunity cost’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two features of a private sector business.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify four aims of promotion.
Aim 1: ...............................................................................................................................
...........................................................................................................................................
Aim 2: ...............................................................................................................................
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Aim 3: ...............................................................................................................................
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Aim 4: ...............................................................................................................................
........................................................................................................................................... [4]
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7
(d) Explain two advantages to PCS of being a multinational company.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think all manufacturing businesses should use recycled materials? Justify your answer.
...........................................................................................................................................
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© UCLES 2020 06_0450_13_2020_1.12 [Turn over

8
4 LXA is a private limited company based in country Z. It makes children’s clothing. LXA sells its
products in competitive markets in several countries. LXA’s directors are considering different ways
for the business to grow. The Finance Director has prepared some financial information before
meeting with some of LXA’s stakeholders. An extract is shown in Table 4.1. The Marketing Director
wants LXA to start producing clothing for adults.
Table 4.1
Extract of LXA’s financial data
2019 2018
Working capital ($000) 180 200
Acid test ratio 0.5 0.7
Return on Capital Employed

6% 8%
(ROCE)
Gross profit margin 20% 25%
(a) Define ‘Return on Capital Employed’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘working capital’.
...........................................................................................................................................
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........................................................................................................................................... [2]
© UCLES 2020 06_0450_13_2020_1.12

9
(c) Outline two possible problems for LXA if the business grows.
Problem 1: ........................................................................................................................
...........................................................................................................................................
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Problem 2: ........................................................................................................................
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........................................................................................................................................... [4]
(d) Explain one way each of the following stakeholder groups might use LXA’s financial information.
Suppliers: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Shareholders: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 06_0450_13_2020_1.12 [Turn over

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(e) Do you think a business should use the same marketing mix to sell its products to different
age groups? Justify your answer.
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...........................................................................................................................................
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Cambridge IGCSE

*3929277729*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_11_2021_1.9
2
1 BKH is a large public limited company. It has 2 000 employees across 18 locations. BKH sells a
range of insurance products including house and car insurance. BKH’s shareholders want the
business to increase profit. The Managing Director knows increasing profit can conflict with the
objectives of other stakeholder groups. She said: ‘Private sector businesses have different objectives
to public sector organisations.’ BKH is also planning to expand by taking over another insurance
company.
(a) Define ‘public sector’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘profit’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify four ways to measure the size of a business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
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Way 3: ...............................................................................................................................
...........................................................................................................................................
Way 4: ...............................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_0450_11_2021_1.9

3
(d) Explain one way each stakeholder’s objectives might conflict with BKH’s objective to increase
profit.
Customers objective: ........................................................................................................
...........................................................................................................................................
How this objective might conflict: ......................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Employees objective: ........................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think economies of scale are the most important reason for taking over another
...........................................................................................................................................
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© UCLES 2021 06_0450_11_2021_1.9 [Turn over

4
2 PJA make fashion clothing for 16-25 year olds. Many of its competitors are multinational companies.
PJA produce new products every 3 weeks. All PJA’s products are made in a local factory because
of import quotas. The Managing Director is reviewing PJA’s financial statements using ratio analysis.
An extract is shown in Table 2.1.
Table 2.1
Extract from PJA’s financial statements for 2020
Revenue ($m) 7 400
Gross profit ($m) 3 330
Profit ($m) 1 100
Current ratio 1.5
(a) Define ‘import quota’.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate PJA’s gross profit margin.
Show your working.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline one benefit and one limitation to PJA of developing new products.
Benefit: .............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Limitation: .........................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_0450_11_2021_1.9

5
(d) Explain two ways PJA’s managers can use ratio analysis.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think multinational companies always benefit the countries they operate in? Justify
your answer.
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2021 06_0450_11_2021_1.9 [Turn over

6
3 Alex started APB as a sole trader business 4 years ago. APB provide printing services for local
businesses such as leaflets and brochures. Alex thinks having a good location is important to any
business. All APB’s 6 employees receive on-the-job training. Alex has a democratic leadership
style and uses job rotation to help keep employees motivated. To meet an increase in demand,
Alex plans to buy an additional printing machine. This will cost $1 800. Alex has to decide on an
appropriate source of finance.
(a) Define ‘job rotation’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two factors that a service sector business should consider when deciding where to
locate.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to APB of using on-the-job training.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_0450_11_2021_1.9

7
(d) Explain one advantage and one disadvantage of Alex having a democratic leadership style.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the amount of money needed is the most important factor for a sole trader to
consider when deciding on an appropriate source of finance? Justify your answer.
...........................................................................................................................................
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© UCLES 2021 06_0450_11_2021_1.9 [Turn over

8
4 Economic growth in country X has created many opportunities for new businesses such as TGH.
TGH manufacture a range of personalised mobile (cell) phone cases using job production. Quality
assurance is important to all 8 employees. TGH operate in a niche market. The Marketing Manager
uses e-commerce as TGH’s channel of distribution. She is considering ways to build customer
relationships.
(a) Define ‘economic growth’.
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘quality assurance’.
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Outline two reasons why building customer relationships might be important to TGH.
Reason 1: .........................................................................................................................
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Reason 2: .........................................................................................................................
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........................................................................................................................................... [4]
© UCLES 2021 06_0450_11_2021_1.9

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(d) Explain one advantage and one disadvantage to TGH of using job production.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think cost-plus is the best pricing method for a new business to use when selling
products to a niche market? Justify your answer.
...........................................................................................................................................
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12
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© UCLES 2021 06_0450_11_2021_1.9

™
Cambridge IGCSE

*7334611208*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_12_2021_1.12
2
1 Pamela is a sole trader. She started her successful photography business 30 years ago. She
specialises in taking pictures of people and places for use in posters, calendars and fashion
magazines. It is a niche market. Pamela uses cost-plus pricing as part of her marketing mix. Offering
a high quality service is important to Pamela and her 2 employees.
(a) Define ‘cost-plus pricing’.
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Define ‘marketing mix’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why offering a high quality service might be important for Pamela’s
business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
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Reason 2: .........................................................................................................................
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........................................................................................................................................... [4]
© UCLES 2021 06_0450_12_2021_1.12

3
(d) Explain two advantages to Pamela of operating as a sole trader.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think operating in a niche market will help a small business have a better chance of
success than operating in a mass market? Justify your answer.
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2021 06_0450_12_2021_1.12 [Turn over

4
2 NPX is an online retail business. All orders are sent directly to customers from its warehouse. NPX
employs 60 full-time workers. The Operations Manager is analysing NPX’s cash-flow forecast. An
extract is shown in Table 2.1. To improve productivity, the manager plans to introduce new
technology that can select and pack all the items for each order. This will make 35 workers redundant.
The technology will cost $40 000. The manager is considering using either internal sources or
external sources to finance this technology.
Table 2.1
NPX’s cash-flow forecast for the period July – September 2021 ($000)
Net cash flow 10 30 30
(a) Define ‘opening balance’.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two ways a business can increase productivity.
Way 1: ...............................................................................................................................
Way 2: ............................................................................................................................... [2]
(c) Identify four sources of internal finance a business might use.
Source 1: ..........................................................................................................................
...........................................................................................................................................
Source 2: ..........................................................................................................................
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Source 3: ..........................................................................................................................
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Source 4: ..........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_0450_12_2021_1.12

5
(d) Explain two possible effects on NPX’s cash-flow forecast of introducing the new technology.
Effect 1: .............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Effect 2: .............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think it is better for a tertiary sector business to use full-time employees rather than
part-time employees? Justify your answer.
...........................................................................................................................................
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© UCLES 2021 06_0450_12_2021_1.12 [Turn over

6
3 GHT is a public limited company. It produces steel products including gates and garage doors.
GHT has a flat organisational structure and a short chain of command. GHT has many stakeholder
groups including 600 employees. The Managing Director is considering introducing job rotation to
improve employee motivation. He has also been analysing some financial data. An extract is shown
in Table 3.1.
Table 3.1
Extract of revenue and cost data for one of GHT’s products (product X)
Units sold in 2020 30 000
Price per unit $100
Variable costs per unit $60
Fixed costs $900 000
Break even output (units) 22 500
(a) Define ‘fixed cost’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the margin of safety for product X in 2020.
Show your working.
...........................................................................................................................................
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........................................................................................................................................... [2]
© UCLES 2021 06_0450_12_2021_1.12

7
(c) Outline two advantages to GHT of having a short chain of command.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Explain one advantage and one disadvantage to GHT of using job rotation to improve employee
motivation.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 06_0450_12_2021_1.12 [Turn over

8
(e) Do you think the shareholders are the most important stakeholder group to the success of a
limited company? Justify your answer.
...........................................................................................................................................
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© UCLES 2021 06_0450_12_2021_1.12

9
4 Raul owns a small farm that grows oranges. His farm is based in country Z. Like all primary sector
activities, farming creates external costs and external benefits. Raul sells all 600 tonnes of his
oranges direct to a drinks manufacturer in country E. The Government of country E plan to introduce
either import tariffs or quotas. Raul said: ‘This might help country E’s Government achieve one of
its economic objectives but how will it affect companies that export to country E?’
(a) Define ‘primary sector’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two government economic objectives.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
........................................................................................................................................... [2]
(c) Outline one external benefit and one external cost that Raul’s business activity might create.
External benefit: ................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
External cost: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_0450_12_2021_1.12 [Turn over

10
(d) Explain two advantages to Raul’s business of selling direct to a manufacturer.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the introduction of import tariffs is likely to have a greater effect than the
introduction of import quotas on an exporting business? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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11
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™
Cambridge IGCSE

*3241365954*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_13_2021_1.12
2
1 WYP is a business partnership. Greg and his 3 friends started the business 7 years ago. WYP
make eyeglasses (spectacles) which are only sold through its website. The price of each pair of
glasses is $95. This is $200 cheaper than its main competitor. Greg said: ‘It was difficult at the start
as we could not get trade credit. We also knew it would take time to develop customer loyalty.’
Greg thinks choosing the right method of promotion is important to the success of any new product.
(a) Define ‘partnership’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘customer loyalty’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible reasons why WYP could not get trade credit.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_0450_13_2021_1.12

3
(d) Explain two possible problems for WYP of selling products at low prices.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think promotion is more important than product for a new business? Justify your answer.
...........................................................................................................................................
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© UCLES 2021 06_0450_13_2021_1.12 [Turn over

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2 Nadia started her successful hairdressing business 4 years ago. Maintaining quality has always
been important to Nadia. She said: ‘I started with no experience of business plans, recruitment,
cash flow or profit. I did not understand how economic issues such as inflation could affect a
business. Now I have 5 hairdressing shops and 20 employees. Last year I made a profit of $100 000.’
Nadia is planning to expand her business. One way she could do this is by selling franchises.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two stages in the recruitment process.
Stage 1: ............................................................................................................................
...........................................................................................................................................
Stage 2: ............................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to Nadia’s business of selling franchises to
expand.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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(d) Explain two possible effects of an increase in the rate of inflation on Nadia’s business.
Effect 1: .............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Effect 2: .............................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think making a profit is more important for a growing business than managing cash
flow? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2021 06_0450_13_2021_1.12 [Turn over

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3 CTF is an ethical business. It manufactures a range of toys. CTF operates in a competitive market.
Over the years technology has changed production at CTF. The Operations Manager is analysing
break-even information. An extract of the cost and revenue data for product X is shown in Table
3.1. Following the closure of its local supplier, the Operations Manager is considering importing
raw materials for product X.
Table 3.1
Cost and revenue data for product X in 2020
Variable cost per toy $25
Price per toy $40
Output 18 000
(a) Define ‘ethical business’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the total variable cost for product X.
Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
© UCLES 2021 06_0450_13_2021_1.12

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(c) Outline one benefit and one limitation to CTF of using break-even analysis.
Benefit: .............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Limitation: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Explain two ways that technology might have changed production at CTF.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2021 06_0450_13_2021_1.12 [Turn over

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(e) Do you think reliability of the supplier is the most important factor for a large manufacturing
business to consider when deciding whether to import materials? Justify your answer.
...........................................................................................................................................
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4 DCN is a large chemical company. It has 8 000 employees across its 3 factories. DCN has agreed
to set up a joint venture with a glass making business to develop a new type of environmentally
friendly packaging. DCN’s Managing Director said: ‘There are disadvantages to a joint venture.
The companies have different leadership styles and business objectives. We will need to look at
ways to overcome possible communication barriers.’
(a) Define ‘business objective’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two ways that business activity might affect the environment.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
(c) Identify four examples of communication barriers.
Example 1: ........................................................................................................................
...........................................................................................................................................
Example 2: ........................................................................................................................
...........................................................................................................................................
Example 3: ........................................................................................................................
...........................................................................................................................................
Example 4: ........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_0450_13_2021_1.12 [Turn over

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(d) Explain two possible advantages to DCN of setting up a joint venture with the other business.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think autocratic leadership is the most effective style for managers to use when an
organisation has a large number of employees? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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Cambridge IGCSE

*3386483180*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_11_2022_1.13
2
1 Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys
and candy (sweets). When Pamela started her business 30 years ago she had no help to manage
the shop. She now has 5 employees. Pamela knows maintaining customer loyalty is important.
She uses competitive pricing. Most of her marketing budget is spent on sales promotion. Pamela
does not use e-commerce.
(a) Define ‘competitive pricing’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘marketing budget’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible threats to Pamela’s business of using e-commerce.
Threat 1: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Threat 2: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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(d) Explain two methods Pamela’s business can use to maintain customer loyalty.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think being a risk-taker is a more important characteristic of a successful entrepreneur
than being creative? Justify your answer.
...........................................................................................................................................
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© UCLES 2022 06_0450_11_2022_1.13 [Turn over

4
2 CTF is a public limited company. It manufactures beds using batch production. The Operations
Director is using break-even analysis to calculate the margin of safety for children’s beds. An extract
from CTF’s output data is shown in Table 2.1. The Operations Director wants to know how an
increase in inflation might affect CTF. She knows there are many environmental pressures that a
manufacturing business could respond to.
Table 2.1
Extract from CTF’s output data (children’s beds per month)
Break-even output 14 000
Current level of output 18 000
Maximum factory output 25 000
(a) Define ‘public limited company’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the margin of safety for CTF’s children’s beds. Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways an increase in inflation might affect CTF.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_0450_11_2022_1.13

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(d) Explain two possible advantages to CTF of using batch production.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think manufacturing businesses should always respond to environmental pressures?
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2022 06_0450_11_2022_1.13 [Turn over

6
3 VCG manufactures high-quality briefcases and travel bags. VCG has 50 skilled production workers
in its factory. VCG is planning to expand by building a second factory. Different locations are being
considered. The Managing Director is reviewing VCG’s financial statements. An extract is shown
in Table 3.1. Both internal and external stakeholder groups of VCG are interested in this information.
Table 3.1
Extract from VCG’s 2021 financial statements ($)
Revenue 2 000 000
Shareholders’ equity (funds) 800 000
(a) Define ‘shareholders’ equity’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two financial statements a public limited company is legally required to publish each
year.
Financial statement 1: ......................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) State whether each of the following are classified as a current asset or a current liability.
Overdraft: ..........................................................................................................................
...........................................................................................................................................
Trade receivables: ............................................................................................................
...........................................................................................................................................
Trade payables: ................................................................................................................
...........................................................................................................................................
Cash in bank: ....................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_0450_11_2022_1.13

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(d) Explain one way each of the following stakeholder groups might use VCG’s accounts:
Shareholders: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Suppliers: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think access to labour is the most important factor for a manufacturing business to
consider when deciding where to locate a new factory? Justify your answer.
...........................................................................................................................................
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© UCLES 2022 06_0450_11_2022_1.13 [Turn over

8
4 MBH is a business organisation in the public sector. It controls 5 hospitals and has 5600 employees
including 440 doctors. External recruitment is used when recruiting skilled employees. The Human
Resources Director uses ideas from Herzberg’s theory to improve employee motivation. He is
worried about communication barriers within MBH. The business has a tall organisational structure
and a long chain of command. Most of MBH’s internal communication is by email and phone calls.
(a) Identify two objectives for a business organisation in the public sector.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘chain of command’.
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Outline two ways MBH can use ideas from Herzberg’s theory to motivate its employees.
Way 1: ...............................................................................................................................
...........................................................................................................................................
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Way 2: ...............................................................................................................................
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(d) Explain how MBH might reduce or remove each of the following communication barriers:
Messages lost: ..................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Use of jargon: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think an organisation should always use external recruitment when recruiting skilled
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Cambridge IGCSE

*6304921481*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_12_2022_1.17
2
1 AHG is an established business as it has been operating for a long time. It sells garden products
including plants and flowers. AHG uses competitive pricing. The business has 4 managers and 30
other employees. All AHG’s managers use delegation. The Finance Manager is analysing AHG’s
statement of financial position as she is interested in its liquidity. An extract is shown in Table 1.1.
Table 1.1
Extract from AHG’s statement of financial position at 30 March 2022 ($000)
Current assets 660
(a) Define ‘current liabilities’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two examples of non-current assets.
Example 1: ........................................................................................................................
...........................................................................................................................................
Example 2: ........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible reasons why liquidity is important to AHG.
Reason 1: .........................................................................................................................
...........................................................................................................................................
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Reason 2: .........................................................................................................................
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© UCLES 2022 06_0450_12_2022_1.17

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(d) Explain two advantages to AHG of its managers using delegation.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think competitive pricing is the best method for an established business to use? Justify
your answer.
...........................................................................................................................................
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© UCLES 2022 06_0450_12_2022_1.17 [Turn over

4
2 RWB manufactures buses.1200 people work in its factory. All employees receive off-the-job training.
RWB uses financial rewards to motivate its employees. Last year RWB made a $1.7 million loss.
The Managing Director said: ‘There are many external influences affecting our business, including
changes in the level of unemployment and new legal controls over business activities which affect
the environment.’
(a) Define ‘off-the-job training’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons (other than financial) why people work.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two methods of financial rewards RWB might use to motivate its employees.
Method 1: ..........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_0450_12_2022_1.17

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(d) Explain two ways RWB might be affected by new legal controls over business activities which
affect the environment.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a reduction in the level of unemployment always benefits businesses? Justify
your answer.
...........................................................................................................................................
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© UCLES 2022 06_0450_12_2022_1.17 [Turn over

6
3 CHW manufactures electrical products including cameras. The business is developing new products.
The Managing Director knows that the stage of the product life cycle can influence CHW’s marketing
decisions about promotion. He is analysing data for one of its products. An extract is shown in
Table 3.1. The business would also like to introduce flow production into the factory.
Table 3.1
Extract from CHW’s data for one type of camera (2021)
Selling price per unit ($) 120
Fixed costs ($) 200 000
Margin of safety (units) 500
(a) Identify one benefit and one cost to a business of developing new products.
Benefit: .............................................................................................................................
...........................................................................................................................................
Cost: .................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the break-even level of output for 2021. Show your working.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways CHW could increase its margin of safety.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_0450_12_2022_1.17

7
(d) Explain two ways in which the stage of the product life cycle might affect CHW’s marketing
decisions about promotion.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think flow production is the best method of production for a manufacturing business
to use? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2022 06_0450_12_2022_1.17 [Turn over

8
4 Tom wants to leave his job to become an entrepreneur. He and his sister plan to start a window
cleaning business. Tom has been told that new businesses are at a greater risk of failure than
established businesses. Tom has to decide whether a partnership is a suitable form of business
organisation for the new business. He has calculated the business will need $700 as start-up capital.
Tom knows that every decision he makes will have an opportunity cost.
(a) Define ‘entrepreneur’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘opportunity cost’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify four reasons why a new business might be at greater risk of failure than an established
business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Reason 3: .........................................................................................................................
...........................................................................................................................................
Reason 4: .........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_0450_12_2022_1.17

9
(d) Explain two suitable sources of start-up capital Tom’s business might use.
Source 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Source 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a partnership is the best form of business organisation for a new business? Justify
your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
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Cambridge IGCSE

*6660195349*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_0450_13_2022_1.15
2
1 MTD manufactures specialist cleaning products including soap. Batch production is used. The
business uses just-in-time inventory control. MTD took 18 months to develop its latest environmentally
friendly cleaning product. The Marketing Manager has to decide on the packaging and method of
promotion for this new product. She said: ‘All our stakeholders, including pressure groups, are
important. MTD wants to contribute to sustainable development.’
(a) Define ‘pressure group’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two features of batch production.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two factors MTD should consider when deciding on the packaging for its new product.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_0450_13_2022_1.15

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(d) Explain two possible advantages to MTD of using just-in-time inventory control.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think using social media is the best way for a business to promote a new product?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2022 06_0450_13_2022_1.15 [Turn over

4
2 TJM is a private limited company. It is a food retailer and has 450 shops. In 2021 TJM’s revenue
increased by $500 million. The Finance Director is analysing TJM’s financial statements. An extract
is shown in Table 2.1. The directors are planning to expand TJM by opening 20 new shops. TJM
will have to carry out a recruitment and selection process for 400 new employees.
Table 2.1
Extract from TJM’s financial statements for 2021 ($m)
Current assets 300
Profit for the year 200
(a) Define ‘revenue’.
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Calculate working capital. Show your working.
...........................................................................................................................................
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(c) Outline two advantages of TJM being a private limited company.
Advantage 1: ....................................................................................................................
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Advantage 2: ....................................................................................................................
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5
(d) Explain two possible reasons why profit might be important to TJM.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think an interview is the best way for a large business to select new employees? Justify
your answer.
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© UCLES 2022 06_0450_13_2022_1.15 [Turn over

6
3 Gareth is planning to start a car washing business using government support. He is analysing
market research data to help him make important decisions about his business. Extracts from this
data are shown in Figure 3.1 and Figure 3.2. Gareth said: ‘I will need to set business objectives.’
He plans to keep his business small. Gareth is worried about the possible effects of higher taxes.
(a) Identify two reasons why businesses need objectives.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons why an owner might want their business to remain small.
Reason 1: .........................................................................................................................
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Reason 2: .........................................................................................................................
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© UCLES 2022 06_0450_13_2022_1.15

7
(c) Outline two ways higher taxes might affect Gareth’s business.
Way 1: ...............................................................................................................................
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Way 2: ...............................................................................................................................
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(d) Explain how the data shown in Figure 3.1 and Figure 3.2 could be useful to Gareth.
Figure 3.1: ........................................................................................................................
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Figure 3.2: ........................................................................................................................
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© UCLES 2022 06_0450_13_2022_1.15 [Turn over

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(e) Do you think offering financial help, such as grants, is the best way for a government to support
business start-ups? Justify your answer.
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© UCLES 2022 06_0450_13_2022_1.15

9
4 BCZ is a multinational company which operates in 12 countries. It manufactures cement, a building

material used by construction companies, so quality assurance is important. Making cement creates
external costs. One of BCZ’s factories is located in country X. The government of country X plans
to introduce new legal controls that will reduce the maximum number of working hours from 45 to
35 hours per week.
(a) Define ‘external cost’.
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two responsibilities of a director.
Responsibility 1: ...............................................................................................................
...........................................................................................................................................
Responsibility 2: ...............................................................................................................
........................................................................................................................................... [2]
(c) Identify four potential benefits to a country’s economy of a multinational company locating
there.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
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Benefit 3: ..........................................................................................................................
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Benefit 4: ..........................................................................................................................
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(d) Explain one possible effect on BCZ and one possible effect on its employees of the new legal
controls that will reduce the maximum number of working hours.
Effect on BCZ: ..................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Effect on BCZ’s employees: .............................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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(e) Do you think it is better for a large manufacturer to use quality assurance rather than quality
control? Justify your answer.
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© UCLES 2022 06_0450_13_2022_1.15

*7372445623*

Paper 1 October/November 2010
1 hour 45 minutes

The businesses described in this paper are entirely fictitious.
Total
DC (CB (LD)) 17528/3

2
1 Leo owns a garage in the centre of a town located in country A. The garage has a lot of For
Examiner’s
stock of cars for sale. It also sells petrol and has a shop selling a wide range of food. ‘Petrol Use
is a loss-leader for my garage’ said Leo. ‘Most of my profit comes from selling cars and I am
looking for ways to increase the profits of the rest of my business.’
(a) What is meant by a loss leader?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two overhead costs that you think Leo’s garage would have to pay.
Overhead 1: ......................................................................................................................
Overhead 2: ................................................................................................................. [2]
(c) The Government in country A has raised interest rates. Explain the impact that this
increase might have on the profits of Leo’s garage.
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3
(d) Identify and explain three ways in which Leo could promote his business. For
Examiner’s
Use
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 3: ...............................................................................................................................
Explanation: ......................................................................................................................
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(e) Although Leo’s business is profitable it has a cash flow problem. Recommend two
methods that Leo could use to help solve the problem. Justify your recommendations.
Method 1: ..........................................................................................................................
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Method 2: ..........................................................................................................................
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© UCLES 2010 0450/11/O/N/10 [Turn over

4
2 Suki is the manager of a department in a large retail shop. Her job is varied and she is For
Examiner’s
responsible for the recruitment and motivation of the staff who work in her department. Suki Use
enjoys her job but sometimes finds it hard. ‘Finding the right staff is difficult and motivating
some of them is almost impossible!’ she said.
(a) Identify two examples of fringe benefits that shop workers are likely to receive.
Fringe benefit 1: ................................................................................................................
Fringe benefit 2: ........................................................................................................... [2]
(b) Identify two reasons why recruiting shop workers might be difficult.
Reason 1: .........................................................................................................................
..........................................................................................................................................
Reason 2: .........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why shop workers might lack motivation.
Reason 1: .........................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
Explanation: ......................................................................................................................
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5
(d) Suki is also responsible for making sure that workers follow Health and Safety laws in For
Examiner’s
her department. Identify and explain three ways in which such laws might help protect Use
employees and customers.
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 3: ...............................................................................................................................
Explanation: ......................................................................................................................
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..................................................................................................................................... [6]
(e) The sales of the shop have fallen recently. The management think that costs must be
cut. Two suggestions have been made to do this:
• Make 50% of the shop workers redundant
• Reduce the hours of all shop workers by 50%.
Which one of these two options do you think the management should choose? Justify
your recommendation.
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6
3 Manfred is the Finance Director for a large public limited company called BTX. He sets the For
Examiner’s
financial budgets for all the departments. Manfred is worried about the falling sales of BTX. Use
He was looking at the data in Table 1.
Table 1: Selected Financial Data from BTX ($000’s)
2008 2009
Sales 1 200 11 00
Net Profit 200 250
Capital employed 1 000 1 500
Current Ratio 1.2 0.7
(a) What is meant by a financial budget?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Calculate the net profit margin for BTX in 2009.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Explain what the current ratio tells Manfred about BTX’s financial position.
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(d) BTX wants to raise new funds in 2010 to help finance its growth plans. Identify and For
Examiner’s
explain three ways it could do this. Use
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 3: ...............................................................................................................................
Explanation: ......................................................................................................................
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(e) Do you think that the management of BTX should be worried about the performance of
the company in 2009? Justify your answer.
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8
4 Sweet Scent is a company that manufactures toiletries such as soap, sun cream and For
Examiner’s
toothpaste. Fig.1 and Fig. 2 show the product life cycles of two of its brands of face cream Use
coded W and X.
Sales Sales
Value $ Value $
Time Time
Fig. 1: Product W Fig. 2: Product X
(a) What is meant by a product life cycle?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify the four stages of the product life cycle of product X.
Stage 1: ............................................................................................................................
Stage 2: ............................................................................................................................
Stage 3: ............................................................................................................................
Stage 4: ....................................................................................................................... [2]
(c) Identify and explain two main differences in the life cycles of the two products shown in
Fig. 1 and Fig. 2.
Difference 1:......................................................................................................................
Explanation: ......................................................................................................................
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Difference 2:......................................................................................................................
Explanation: ......................................................................................................................
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(d) Sweet Scent is soon to launch a new range of toothpaste called Gleam. For
Examiner’s
Use
Identify and explain three factors that the management of Sweet Scent should consider
before setting a price for Gleam.
Factor 1: ............................................................................................................................
Explanation: ......................................................................................................................
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Factor 2: ............................................................................................................................
Explanation: ......................................................................................................................
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Factor 3: ............................................................................................................................
Explanation: ......................................................................................................................
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(e) The management of Sweet Scent believe that the more the company spends on
advertising, the more profitable the product will be. Do you think they are right? Justify
your answer.
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10
5 ATC is a very large exporting company with many offices throughout the world. The top For
Examiner’s
management know that effective communication is vital in such a large business. Recently the Use
management held a meeting to consider the ways communication operates in the business.
Discussion focused on the ideas of one-way communication and communication feedback.
(a) What is meant by communication feedback?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two business situations in which one-way communication would be suitable.
Situation 1: ........................................................................................................................
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Situation 2: ........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which information technology has affected how a
business communicates with its stakeholders.
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
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(d) ATC employs 10 000 staff throughout the world. Identify and explain three benefits that For
Examiner’s
ATC might gain from delegating decision-making to its staff around the world. Use
Benefit 1:...........................................................................................................................
Explanation: ......................................................................................................................
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Benefit 2:...........................................................................................................................
Explanation: ......................................................................................................................
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Benefit 3:...........................................................................................................................
Explanation: ......................................................................................................................
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(e) ATC has a policy of recruiting staff for the senior jobs from within the business. It is
changing its policy so that external recruitment will be used to recruit senior staff in the
future. Do you think that the change will benefit ATC? Justify your answer.
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© UCLES 2010 0450/11/O/N/10

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1 hour 45 minutes

Total
DC (SM) 24022/2
2
1 Mike is a sole trader. He owns a shop selling fruit and vegetables. ‘I am always looking for For
ways of increasing my profits’ he said, ‘but it is hard to compete against big supermarket Examiner’s
shops. I have low profit margins on most of my goods so I cannot cut prices any more.’ Use
The business also has an overdraft with the bank.
(a) Identify two variable costs of Mike’s business.
Variable cost 1: ................................................................................................................
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Variable cost 2: ................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by a ‘low profit margin’?
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(c) Identify and explain two advantages to Mike of using a bank overdraft.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2010 0450/12/O/N/10

3
(d) Identify and explain three methods that Mike could use to compete against larger For
competitors. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think Mike should take on a business partner? Justify your answer.
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4
2 Imogen is a Human Resources manager in a chain of hotels. Recruiting and retaining For
employees is a major part of her job. ‘Recruiting staff is easy but keeping them is much harder’ Examiner’s
she said. The employees are paid a wage plus a bonus but wages are low. All employees are Use
given an employment contract when they join the company.
(a) Identify two items that are in an employment contract.
Item 1: ..............................................................................................................................
..........................................................................................................................................
Item 2: ..............................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by a ‘bonus’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(c) Identify and explain two possible reasons why wage levels are low in this business.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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5
(d) Other than paying higher wages, identify and explain three methods that Imogen could For
use to help keep staff. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that it is always important for a business to reduce the number of
employees leaving each year? Justify your answer.
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6
3 Manfred is the Finance Director of a large public limited company BTX. After looking at the For
data in Table 1, Manfred was worried that BTX might be facing problems. Examiner’s
Use
Table 1: Selected Financial Data for BTX ($’000s)
2008 2009
Sales 1200 800

Net profit 200 100
Capital employed 1000 400
Dividends 150 20
The current ratio was 1.2 in 2008 and 1.5 in 2009.
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the return on capital employed (ROCE) in 2009.
..........................................................................................................................................
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(c) Explain how ROCE can be used to assess the performance of a company.
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© UCLES 2010 0450/12/O/N/10

7
(d) Identify and explain three ways by which the company can improve its net profits. For
Examiner’s
Way 1: .............................................................................................................................. Use
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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8
4 Gorgeous Chocs is a manufacturer of high quality chocolates. The company spends a lot of For
money on marketing but the management knows that it is important that such spending is Examiner’s
cost effective. The company accountant has just introduced new financial budgets for each Use
department.
(a) What is meant by ‘cost effective’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) What is meant by a ‘financial budget’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two factors that Gorgeous Chocs needs to consider in designing
the packaging for its products.
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/12/O/N/10

9
(d) Identify and explain three factors that Gorgeous Chocs should consider when For
advertising its products. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Do you think that the prices charged by Gorgeous Chocs for its products are important
in determining the success of these products? Justify your answer.
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10
5 ATC is a large exporting company with many offices throughout the world. The senior For
managers know that effective communication is vital in such a large business. Recently the Examiner’s
management held a meeting to consider ways of improving communication in the business. Use
Discussion focused on the problems of one-way communication and the importance of
feedback.
(a) What is meant by ‘one-way communication’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two benefits of the telephone as a means of communication.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two benefits to the management of receiving feedback from
employees.
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 0450/12/O/N/10

11
(d) ATC invests heavily in new technology in its business. Identify and explain three For
benefits that ATC may gain from this investment in new technology. Examiner’s
Use
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) As a large employer of people, ATC knows that it must follow all the laws that affect
people at work. Do you think that such laws benefit both ATC and its staff? Justify your
answer.
..........................................................................................................................................
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1 hour 45 minutes

Total
DC (SM) 24023/3
2
1 Gisela and Winny have a business partnership selling children’s clothes. The business For
competes against many large clothing shops. It is difficult for the partnership to hold more Examiner’s
stock because the business does not have enough working capital. Gisela and Winny are Use
thinking of converting the business into a private limited company. They agree that the
business objectives should be growth and profitability.
(a) What is meant by a ‘business partnership’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) Identify two advantages to a business of holding a low level of stock.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two reasons why working capital is important to a business.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2010 0450/13/O/N/10

3
(d) Identify and explain three reasons why Gisela and Winny’s business may find it difficult For
to compete against larger clothing shops. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that the business is more likely to achieve its objectives if it converts to a
private limited company? Justify your answer.
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4
2 Nigella is a Human Resources manager of a chain of fast food restaurants. She is planning For
to recruit a manager of a new restaurant soon to be opened. A job description has been Examiner’s
prepared and a job advertisement written. Use
(a) What is meant by a ‘Human Resources manager’?
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two factors that Nigella should consider when deciding where to place the job
advertisement.
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to the business of producing a job description for
the vacancy of restaurant manager.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2010 0450/13/O/N/10

5
(d) Identify and explain three functions of management in a fast food restaurant. For
Examiner’s
Function 1: ....................................................................................................................... Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Function 2: .......................................................................................................................
Explanation: .....................................................................................................................
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Function 3: .......................................................................................................................
Explanation: .....................................................................................................................
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(e) Nigella thinks that if the right manager is appointed then the restaurant is certain to be
successful. Do you agree? Justify your answer.
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6
3 Roberto is the Finance Director of WWT, a large distribution company. He is looking at the For
data shown in Table 1. Examiner’s
Use
Table 1: Selected Financial Data WWT ($’000s)
2008 2009
Sales 8000 6500

Cost of sales 5000 4000
Net profit 1000 400
(a) Calculate the gross profit margin for WWT in 2009.
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...................................................................................................................................... [2]
(b) What is meant by ‘net profit’?
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...................................................................................................................................... [2]
(c) Identify two stakeholders who might be interested in the data in Table 1. Explain why
each stakeholder would be interested in the data.
Stakeholder 1: ..................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Stakeholder 2: ..................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2010 0450/13/O/N/10

7
(d) Using the data in Table 1, identify and explain three possible reasons why the net profit For
of WWT fell in 2009. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Recommend two ways that Roberto could use which might increase the future profits of
WWT. Justify your answer.
Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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8
4 Giovani owns a ladies’ hairdressing business. The business cuts and styles hair and also For
sells a range of beauty products such as hair sprays. The market for ladies’ hairdressing is Examiner’s
very competitive. Giovani is about to start selling a new range of beauty products with the Use
support of an advertising campaign.
(a) Identify two factors Giovani should consider before deciding which new beauty products
to sell.
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by a market being ‘very competitive’?
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which advertising might help Giovani launch the new
product range successfully.
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2010 0450/13/O/N/10

9
(d) Identify and explain three methods, other than advertising, Giovani could use to For
increase the sales turnover of his hairdressing business. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Do you think that it is important for a business to sell more than one type of product or
service? Justify your answer.
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10
5 LWC is a large multinational mining business with operations throughout the world. For
The management knows that effective communication is important in such a business. Examiner’s
Decision making is centralised at the Head Office of the company. Use
(a) What is meant by ‘effective communication’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) Identify two advantages of using e-mails as a means of communication within a

business.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two barriers to effective communication that might exist within a
business.
Barrier 1: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Barrier 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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11
(d) Identify and explain three consequences to a business of centralising decision making For
at its Head Office. Examiner’s
Use
Consequence 1: ...............................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Consequence 2: ...............................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Consequence 3: ...............................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that multinational businesses are of benefit to your own country’s economy?
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* 5 7 1 0 6 7 4 3 7 7 *

1 hour 45 minutes

Total
DC (NF/SW) 36795/3
2
1 Carlos was made redundant from his job in a factory. He used his redundancy money and For
some of his savings to start a new business. He bought a boat to give trips to tourists on Examiner’s
a river near his home. The boat cost him $150 000. Table 1 shows the revenue and cost Use
estimates that Carlos made.
Table 1
Revenue per boat trip $80

Variable cost per boat trip $30
Average number of boat trips per week 25
Weekly overhead costs [fixed costs] $500
Carlos wanted his business to give him job security and to give a return on his investment of
at least 20% each year. He estimates that annual profits will be $37 500.
(a) What is meant by ‘made redundant’?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two examples of overhead costs that Carlos might incur.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
..................................................................................................................................... [2]
(c) Using the information given in Table 1, draw a break-even chart for Carlos’ business.
$
2500
2000
1500
Revenue Weekly
& Costs Break-Even
1000 Chart
500
0
0 10 20 30
Number of boat trips per week
[4]
© UCLES 2011 0450/11/O/N/11
3
(d) Identify and explain three methods that Carlos could use to promote his new business. For
Examiner’s
Method 1: ......................................................................................................................... Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Carlos wanted his business to give him job security and a return on capital of at least
20%. Do you think that his business will help him achieve these objectives? Justify your
answer.
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4
2 Early Tots makes wooden toys for children. The business uses both primary and secondary For
market research data to decide what products to make. It has a wide range of toys but some Examiner’s
of the products are nearing the end of their product life cycle. The managers are thinking Use
about using extension strategies for these products.
(a) What is meant by the term ‘secondary market research’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) What is meant by the term ‘product life cycle’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(c) Identify and explain two methods that Early Tots could use to gather primary market
research data.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2011 0450/11/O/N/11

5
(d) Identify and explain three extension strategies that Early Tots could use. For
Examiner’s
Strategy 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Strategy 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Strategy 3: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Consider the advantages and disadvantages of two channels of distribution that Early
Tots could use for a new range of wooden toys. Recommend which channel Early Tots
should use. Justify your answer.
Channel 1: .......................................................................................................................
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Channel 2: .......................................................................................................................
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Recommendation: ............................................................................................................
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6
3 Crompton Springs, a private limited company, bottles mineral water. The production method For
is automated but inefficient, because the machinery used was bought 20 years ago. The Examiner’s
company uses unskilled and low paid workers to load and unload the production lines. The Use
managers have decided to invest in new machinery.
(a) What is meant by ‘production method is automated’?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two features of a private limited company.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two possible reasons why workers at Crompton Springs are low
paid.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2011 0450/11/O/N/11

7
(d) Identify and explain three problems that inefficiency can cause a business. For
Examiner’s
Problem 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that the employees at Crompton Springs will be happy with the managers’
decision to invest in new machinery? Justify your answer.
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8
4 XYZ is a large retail business with over 50 shops. The business is going to open a new shop For
and wants to recruit a manager. A job description for the new position of shop manager Examiner’s
has been produced. The directors are also looking at the methods they use to pay their Use
employees.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(b) Identify two suitable places to advertise the position of a new shop manager.
Place 1: ............................................................................................................................
..........................................................................................................................................
Place 2: ............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two advantages to XYZ of producing a job description for the
position of shop manager.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/O/N/11

9
(d) Identify and explain three different payment methods that XYZ could use to reward their For
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that the appointment of a suitable shop manager will mean that the new
shop is certain to be successful? Justify your answer.
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10
5 Country W has a mixed economy. The public sector has grown in recent years. The For
Government has also introduced many new laws regulating business behaviour and Examiner’s
protecting employees and consumers. Use
(a) What is meant by the term ‘mixed economy’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Identify two objectives often set by businesses in the public sector.
Objective 1: ......................................................................................................................
..........................................................................................................................................
Objective 2: ......................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why the size of the public sector might increase over
time.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/O/N/11

11
(d) Identify and explain three ways in which consumers might benefit from consumer For
protection laws. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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(e) The management of many businesses in the private sector think that employment
legislation is making them less competitive. Do you agree? Justify your answer.
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12
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© UCLES 2011 0450/11/O/N/11

* 3 1 7 6 7 3 1 6 0 8 *

1 hour 45 minutes

Total
DC (NF/SW) 36796/2
2
1 Stilvan always wanted to run his own business. When he left school he borrowed money For
from his parents to start a gardening business. The business name is Stilvan Grass Cutters. Examiner’s
Stilvan bought some equipment to cut grass and trees. Stilvan delivers leaflets to people’s Use
homes to promote his business.
Table 1 shows data for a typical week for Stilvan’s business.
Table 1
Average price per customer $15

Variable cost per job $7
Weekly overheads $320
Number of customers 50
Demand for his services is seasonal and this causes problems for Stilvan.
(a) Identify two objectives that Stilvan might have had when he set up his business.
Objective 1: ......................................................................................................................
..........................................................................................................................................
Objective 2: ......................................................................................................................
..................................................................................................................................... [2]
(b) Identify two advantages of using leaflets as a method of promotion.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..................................................................................................................................... [2]
(c) Using the information given in Table 1, draw a break-even chart for Stilvan’s business.
$
1000
750
Weekly
Revenue & Break-Even
Costs 500
Chart
250
0
0 20 40 60
Number of customers per week
[4]
© UCLES 2011 0450/12/O/N/11

3
(d) Identify and explain three problems that seasonal demand can cause for Stilvan’s For
business. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Stilvan wants to make his business more profitable. Recommend ways in which this
could be achieved. Justify your answer.
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4
2 Cycles4u make a wide range of bicycles. The business is ‘product orientated’ as it believes For
that good products will sell easily. The business does not use any market research to help in Examiner’s
decision making. However, Cycles4u does spend a lot of money on promoting its products to Use
the target markets.
(a) What is meant by the term ‘product orientated’?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) What is meant by the term ‘target market’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two possible disadvantages to a business of having a wide product
range.
Disadvantage 1: ...............................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2011 0450/12/O/N/11

5
(d) Identify and explain three channels of distribution that Cycles4u could use to help launch For
a new range of bicycles. Examiner’s
Use
Channel 1: .......................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Channel 2: .......................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Channel 3: .......................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that Cycles4u should use market research in the future? Justify your
answer.
..........................................................................................................................................
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6
3 Mayfair Solutions, a public limited company, develops software packages for customers. The For
staff it employs are highly paid, but Mayfair Solutions believes that this is money well spent. Examiner’s
The company has to keep updating its software packages because customer requirements Use
keep changing. The software market is very competitive.
(a) What is meant by the term ‘public limited company’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two features of a very competitive market.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two possible reasons why the staff at Mayfair Solutions are paid
high wages.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2011 0450/12/O/N/11

7
(d) Identify and explain three problems that the need to keep updating its software packages For
may create for Mayfair Solutions. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Mayfair Solutions has recently received a takeover bid from a large rival software
company. Do you think that this takeover would benefit both employees and shareholders
of Mayfair Solutions? Justify your answer.
..........................................................................................................................................
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8
4 Travelscene is a company that specialises in holiday tours for people with interests in sport. It For
arranges trips like ski holidays and group visits to major events such as the Olympic Games. Examiner’s
This is a niche market. Travelscene is a very profitable business. The company has an Use
excellent reputation as an efficient business. It employs experienced tour managers who look
after the needs of tourists during their trip. It currently has a vacancy for a tour manager.
(a) What is meant by the term ‘a niche market’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) What is meant by ‘an efficient business’?
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..................................................................................................................................... [2]
(c) Identify and explain two qualities that a new Travelscene tour manager will need.
Quality 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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Quality 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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9
(d) Identify and explain three possible reasons why Travelscene is a very profitable business. For
Examiner’s
Reason 1: ......................................................................................................................... Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) The management of Travelscene is thinking of starting a new range of family beach
holidays, aimed at the mass market. Do you think that this would be a good idea? Justify
your answer.
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10
5 The structure of the economy in country W has changed greatly in the last ten years. Primary For
sector activities have declined in importance, but a range of new tertiary sector businesses Examiner’s
have started up. Output in the secondary sector has increased, but employment in this sector Use
has fallen. These changes have caused social and economic problems, with many people
finding it difficult to get jobs. The wages of workers in the primary sector businesses have
been falling.
(a) What is meant by ‘primary sector activities’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two examples of businesses that would be classified as being in the tertiary
sector.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(c) Identify and explain two possible reasons why workers’ wages in primary sector
businesses are falling.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/12/O/N/11

11
(d) Identify and explain three possible causes of the structural changes that have occurred For
in country W. Examiner’s
Use
Cause 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Cause 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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Cause 3: ..........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that the Government should subsidise primary sector businesses to stop
them from closing? Justify your answer.
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12
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© UCLES 2011 0450/12/O/N/11

* 2 5 2 6 4 3 1 2 2 3 *

1 hour 45 minutes

Total
DC (NF/SW) 36797/1
2
1 Klaus is a sole trader who owns a window cleaning business. In the past, he cleaned windows For
himself, but now he is the manager and employs other people to do the cleaning. In order Examiner’s
to attract new customers, Klaus puts advertisements for his business in local shop windows. Use
Klaus plans to continue to expand his business, but knows he will need more capital.
Table 1 shows data for a typical week for Klaus’ business.
Table 1

(a) What is meant by the term ‘variable cost’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Identify two advantages to Klaus of using local shop windows to advertise his business.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..................................................................................................................................... [2]
(c) Using the data given in Table 1, draw a break-even chart for Klaus’ business.
$
800
600
Weekly
Revenue &
Break-Even
Costs 400
Chart
200
0
0 20 40 60 80
[4]
© UCLES 2011 0450/13/O/N/11

3
(d) Identify and explain three management functions that Klaus performs. For
Examiner’s
Function 1: ....................................................................................................................... Use
Explanation: .....................................................................................................................
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Function 2: .......................................................................................................................
Explanation: .....................................................................................................................
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Function 3: .......................................................................................................................
Explanation: .....................................................................................................................
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(e) Recommend to Klaus two appropriate ways in which he could raise capital to expand
his business. Justify your answer.
Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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4
2 Nigel owns a recruitment agency. If a company needs temporary workers, Nigel’s business For
will find them. Nigel rents an office in the centre of town. His business has a reputation for Examiner’s
being very efficient. Nigel employs office workers who promote his business by continually Use
updating the company website. Nigel is an entrepreneur who takes risks to make a profit. He
believes that the economic future of his country depends on small businesses such as his.
(a) What is meant by the term ‘profit’?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two overhead costs that Nigel’s business would incur.
Overhead cost 1: ..............................................................................................................
..........................................................................................................................................
Overhead cost 2: ..............................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why being efficient should help Nigel’s business to
remain successful.
Reason 1: ........................................................................................................................
Explanation: ......................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2011 0450/13/O/N/11

5
(d) Identify and explain three advantages to Nigel’s business of using a website to promote For
its services. Examiner’s
Use
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 3: ....................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that Governments should help people start up small businesses by offering
financial support? Justify your answer.
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6
3 Crispy Crunch is the brand name of a breakfast cereal made by Banbury. The business For
spends a lot of money on promoting its brands. Some Banbury managers think this spending Examiner’s
is not cost effective. ‘Perhaps modernising our factories to automate the production process Use
would be a better use of our capital’ said one manager, ‘I think a lot of our marketing
expenditure is wasted’.
(a) What is meant by the term ‘brand name’?
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..................................................................................................................................... [2]
(b) What is meant by the term ‘capital’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(c) Identify and explain two reasons why spending money on advertising might not be cost
effective.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2011 0450/13/O/N/11

7
(d) Identify and explain three factors that a company should consider in deciding on the For
name for a new brand of breakfast cereal. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that automation in the factory would benefit Banbury’s employees and
shareholders? Justify your answer.
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8
4 Wesso is a large manufacturing business. Many workers complain about poor communication For
in the business. Wesso pays its factory workers a basic wage plus a bonus. The Human Examiner’s
Resources Director wants to introduce new working practices in its factories, such as making Use
workers more flexible in their jobs. The aim is to improve productivity and cut costs. The trade
union leader is opposed to these changes.
(a) What is meant by the term ‘productivity’?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two reasons why communication within a large business is often difficult.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two possible reasons why Wesso uses bonuses as a means of
paying staff.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/13/O/N/11

9
(d) Identify and explain three non-financial ways of motivating the staff in a business. For
Examiner’s
Way 1: .............................................................................................................................. Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) How can the management at Wesso persuade the trade union to accept the proposed
changes in working practices? Justify your answer.
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10
5 The Government of country Z has decided to invest a large amount of capital in building For
a new road system. Some people don’t like the decision because of the social costs that Examiner’s
it will create. However, most businesses think the decision is a good one. The business Use
sector would also like to see the Government lower taxes on goods and remove some of the
consumer protection and employment laws that it claims increase business costs.
(a) Identify two ways that employees may be protected at work by employment laws.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(b) Identify two reasons why Governments put taxes on goods.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why many business managers think the decision to
build more roads is a good one.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/13/O/N/11

11
(d) Identify and explain three social costs that the road building programme might create. For
Examiner’s
Cost 1: ............................................................................................................................. Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Cost 2: .............................................................................................................................
Explanation: .....................................................................................................................
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Cost 3: .............................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) The management of many businesses in the private sector think that consumer and
employment legislation increases business costs. Do you think society would benefit
from a reduction in such laws? Justify your answer.
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12
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© UCLES 2011 0450/13/O/N/11

* 8 2 2 9 2 4 6 9 8 0 *

1 hour 45 minutes

Total
DC (RCL (JDA)) 49286/1

2
1 Durban Dragons is a big football club. Recently fewer people have been watching its matches For
and ticket revenue is falling. Some people say that ticket prices for matches are too high Examiner’s
and should be reduced. The club has high fixed costs and needs to improve its cash flow. Use
The club directors have been trying to gain sponsorship and a number of businesses are
very interested.
(a) What is meant by ‘cash flow’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Give two examples of fixed costs that a business like a football club would incur.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(c) Identify and explain two ways the cash flow of Durban Dragons could be improved.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
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Explanation: .....................................................................................................................
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© UCLES 2012 0450/11/O/N/12

3
(d) Identify and explain two reasons why businesses might want to sponsor football clubs For
like Durban Dragons. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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(e) Do you think if Durban Dragons reduce ticket prices for matches this will increase
revenue? Justify your answer.
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4
2 Gresham Textiles manufactures high quality clothing. Production is labour intensive. For
Managers are paid more than production line workers in the factory. The business is investing Examiner’s
in automated machinery. The management also wants to introduce lean production methods. Use
(a) What is meant by ‘labour intensive’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two suitable sources of finance that Gresham Textiles could use to finance the
investment in automated machinery.
Source 1: .........................................................................................................................
Source 2: .................................................................................................................... [2]
(c) Identify and explain two reasons why factory managers are paid more than production
line workers at Gresham Textiles.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2012 0450/11/O/N/12

5
(d) Identify and explain two ways lean production methods could reduce costs in the factory. For
Examiner’s
Way 1: .............................................................................................................................. Use
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that a change to automated methods of production would benefit
customers of Gresham Textiles? Justify your answer.
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6
3 Table 1 shows the Balance Sheet for company D at the end of 2010 and 2011. For
Examiner’s
Table 1: Company D Balance Sheet [$m] Use
2010 2011
Net Assets 650 700
Long-term Liabilities 350 350

The accounts also showed that the net profit of company D was $80m in 2010 and $120m
in 2011.
(a) What is meant by ‘capital employed’?
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Calculate company D’s current ratio in 2011.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) The directors are planning further expansion of the company. Identify and explain two
benefits to company D of raising finance by selling more shares.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/11/O/N/12

7
(d) Identify and explain a reason why the following stakeholders would be interested in For
using company D’s accounts. Examiner’s
Use
Creditors’ reason: .............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Employees’ reason: ..........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Shareholders’ reason: ......................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think the performance of company D in 2011 has improved? Justify your
conclusion using the data provided.
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8
4 Jergen Cosmetics makes a range of beauty products for women in country A. ‘We are a For
market orientated company’ said Klaus, the Managing Director. ‘One of our business Examiner’s
objectives is to increase sales turnover. We have just set up our own website and increased Use
our marketing budget. Our country’s economic growth is forecast to be 4% next year and this
will guarantee our company’s profitability.’
(a) What is meant by ‘market orientated company’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) What is meant by ‘Managing Director’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(c) Identify and explain two benefits to Jergen Cosmetics of setting business objectives.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2012 0450/11/O/N/12

9
(d) Identify and explain two benefits to Jergen Cosmetics of having its own website. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
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Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that economic growth in country A will lead to increased profitability for
Jergen Cosmetics? Justify your answer.
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10
5 Greenfield manufactures furniture. The company imports wood and other raw materials For
from several countries. Marcos is the Managing Director of Greenfield. Marcos said that his Examiner’s
company was affected by import quotas and changes in exchange rates. He said: ‘Greenfield Use
has to buy its raw materials from other countries as there are no timber (wood) resources in
our own country.’
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two ways that Greenfield’s business might harm the environment.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways in which changes in exchange rates could cause problems
for Greenfield.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
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Explanation: .....................................................................................................................
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© UCLES 2012 0450/11/O/N/12

11
(d) The Government in Greenfield’s country is introducing consumer protection laws. For
Identify and explain three ways in which Greenfield’s business could be affected by Examiner’s
these new laws. Use
Way 1: ..............................................................................................................................
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Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
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Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
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Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Greenfield’s management is thinking of expanding the business by taking over another
furniture manufacturer. Do you think this is a good idea for Greenfield? Justify your
answer.
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© UCLES 2012 0450/11/O/N/12

* 8 8 6 2 3 9 8 7 2 5 *

1 hour 45 minutes

Total
DC (LEO/SW) 49285/1
2
1 Kruger Enterprises manufactures a range of electrical products such as washing machines. For
Its best-selling product is in the decline stage of its life cycle. The management uses cost plus Examiner’s
pricing and believes that the demand for the company’s products is price inelastic. Changes Use
in Kruger’s marketing mix are being considered. The company is researching the market and
plans to introduce some new products next year.
(a) Label on Fig. 1 the other two stages of the product life cycle.
I II III IV
Sales
Introduction Decline
Time
Fig. 1: Product life cycle

[2]
(b) What is meant by ‘cost plus pricing’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible advantages to Kruger Enterprises of researching the
market.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2012 0450/12/O/N/12

3
(d) Identify and explain three benefits to Kruger Enterprises of introducing new products. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think reducing the price of its washing machines will increase the sales turnover
of Kruger Enterprises? Justify your answer.
..........................................................................................................................................
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4
2 Just4U manufactures motor car parts. The production methods are capital intensive. The For
management believes that the company benefits from economies of scale. However, Examiner’s
problems with the workers in the factory have led to poor quality production. Despite this, Use
the Managing Director believes that the company must continue to grow if it is to achieve its
objectives. The business is planning a takeover of a competitor.
(a) What is meant by ‘capital intensive’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two objectives that a business like Just4U might have.
Objective 1: ......................................................................................................................
..........................................................................................................................................
Objective 2: ......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two economies of scale from which Just4U could benefit.
Economy of scale 1: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Economy of scale 2: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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5
(d) Identify and explain two problems that poor quality might create for Just4U. For
Examiner’s
Problem 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Do you think that a takeover of a competitor will benefit the shareholders of Just4U?
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6
3 Celtic Springs, a public limited company, is a water bottling business. Its shareholders have For
been unhappy with the performance of the business and are threatening to take action at Examiner’s
the next Annual General Meeting (AGM). Table 1 shows an extract from the company’s latest Use
Profit/Loss Account.
Table 1: Celtic Springs Profit/Loss Account 2011 ($m)
Sales revenue ?
Cost of sales 150
Gross profit ?
Overheads/expenses 70
Net profit 10
The accounts of the business also show that the capital employed by Celtic Springs was
$650m.
(a) Calculate gross profit and sales revenue in 2011.
Gross profit: .....................................................................................................................
Sales revenue: ............................................................................................................. [2]
(b) Identify two functions of an Annual General Meeting.
Function 1: .......................................................................................................................
..........................................................................................................................................
Function 2: .......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways Celtic Springs could reduce its cost of sales.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2012 0450/12/O/N/12

7
(d) Identify and explain three reasons why profit is important to a company such as Celtic For
Springs. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the shareholders of Celtic Springs are right to be unhappy with the
company’s performance? Justify your answer using the data provided.
..........................................................................................................................................
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8
4 Colour Rack manufactures paint in country Z. It sells its products to customers both nationally For
and internationally. Colour Rack uses a specialist transport company to deliver its products to Examiner’s
customers. The Colour Rack brand is well known. Many of its factory employees are unhappy Use
at work. They are well paid but lack motivation due to the repetitive nature of their work.
(a) Paint manufacturing is a secondary sector business activity. Identify two types of
business activity in the tertiary sector.
Type 1: .............................................................................................................................
Type 2: ......................................................................................................................... [2]
(b) Identify two problems Colour Rack could have when exporting its paint to customers in
other countries.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
...................................................................................................................................... [2]
(c) Explain how a manufacturing business adds value to its products.
..........................................................................................................................................
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© UCLES 2012 0450/12/O/N/12

9
(d) Identify and explain three factors Colour Rack should consider in deciding which For
transport company to use to deliver its products. Examiner’s
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Recommend two strategies for improving the motivation of Colour Rack’s factory
employees. Justify your answer.
Strategy 1: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Strategy 2: ........................................................................................................................
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10
5 Country W has a mixed economy. Herio is a Government economist. He said: ‘Business For
activity in the private sector can lead to external costs, such as pollution. It can also Examiner’s
create external benefits. I believe that businesses that create external benefits should be Use
encouraged and those that create external costs should be closed down.’ Country W has low
economic growth and rising inflation.
(a) What is meant by ‘the private sector’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by ‘rising inflation’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Most businesses set objectives. Identify and explain two reasons why having objectives
may be important for a business.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2012 0450/12/O/N/12

11
(d) Identify three external benefits and explain how business activity can create each For
benefit. Examiner’s
Use
Benefit 1: ..........................................................................................................................
Explanation of how benefit is created: .............................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
.........................................................................................................................................
...................................................................................................................................... [6]
(e) Herio believes businesses that create external costs should be closed down. Do you
agree with him? Justify your answer.
..........................................................................................................................................
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12
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© UCLES 2012 0450/12/O/N/12

* 1 0 6 8 8 7 3 5 0 2 *

1 hour 45 minutes

Total
DC (RCL (KM)) 49284/1

2
1 Rafa is a sole trader who owns a successful business selling fruit and vegetables. He started For
with just one shop, but now he owns many shops in the local area. Each shop has its own Examiner’s
manager. ‘I spend most of my time communicating with my managers now, not customers’ Use
Rafa said.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two ways of measuring the success of a business.
Measure 1: .......................................................................................................................
Measure 2: .................................................................................................................. [2]
(c) Identify and explain two appropriate methods of communication between Rafa and his
shop managers.
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/O/N/12

3
(d) Identify and explain three main functions that a manager of a shop performs. For
Examiner’s
Function 1: ....................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Function 2: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Function 3: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Rafa thinks that if he continues to open more shops his business will become more
profitable. Do you agree? Justify your answer.
..........................................................................................................................................
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4
2 Table 1 shows a summary of the Balance Sheet for C & C. For

Examiner’s
Table 1: C & C Balance Sheet ($m) Use
2010 2011
Net Assets 800 1300
Long-term liabilities 600 1100

(a) What is meant by ‘current assets’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Calculate the current ratio for C & C in 2011.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two situations when a business might use an overdraft to finance its
activities.
Situation 1: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Situation 2: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/O/N/12

5
(d) Identify and explain three changes that occurred in the financial position of C & C For
Use
Change 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Change 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Change 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) How useful are the accounts of a business to any two stakeholder groups? Justify your
answer.
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6
3 Koni Travel sells holidays to customers in niche markets in country Y. Most of its holidays are For
expensive and are aimed at high income customers. Over 80% of Koni Travel’s customers Examiner’s
have used the company before. The holiday market in country Y is large and is divided into Use
a number of segments. Many of Koni Travel’s competitors spend money on market research
and advertising.
(a) What is meant by ‘niche markets’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two ways of segmenting a market.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two reasons why market research information might not be useful
to a business in making decisions.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/O/N/12

7
(d) Identify and explain three reasons why a holiday company would spend money on For
advertising. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think offering cheaper holidays would be a good idea for Koni Travel? Justify
your answer.
..........................................................................................................................................
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8
4 J and K is a large business that uses flow production methods. Productivity in its factories is For
high and the business benefits from economies of scale. Output per employee continues to Examiner’s
rise, although labour turnover has increased recently. The management thinks that unit costs Use
will continue to fall if the business gets larger.
(a) What is meant by ‘flow production methods’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two ways of measuring the size of a business.
Measure 1: .......................................................................................................................
Measure 2: .................................................................................................................. [2]
(c) Identify and explain two reasons why measuring ‘output per employee’ is important to
the management of a business.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/O/N/12

9
(d) Identify and explain two reasons why a high labour turnover might occur in a business For
such as J and K. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) The management of J and K thinks that unit costs will continue to fall if the business
gets larger. Do you think they are right? Justify your answer.
..........................................................................................................................................
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10
5 ‘Too many entrepreneurs and businesses are only interested in making profits’ said a For
Government official. ‘The Government wants to make sure that the rights of workers are Examiner’s
protected. We have passed employment laws and health and safety laws.’ Some employers Use
think that too many laws have reduced companies’ profits and harmed the economy.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two examples of discrimination at work.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
..................................................................................................................................... [2]
(c) An employment contract includes the personal details of the employee. Identify and
explain two other features of an employment contract.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 0450/13/O/N/12

11
(d) Identify and explain three ways in which laws can protect workers. For
Examiner’s
Way 1: .............................................................................................................................. Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that company profits can be damaged by employment laws and health and
safety laws? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
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12
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© UCLES 2012 0450/13/O/N/12

* 5 0 6 6 3 5 4 9 6 8 *

1 hour 45 minutes

DC (NF) 63413/2
2
1 Earnshaw is a company that buys raw materials and components in bulk. It uses them to For
manufacture furniture using flow production methods. Productivity in the factory is high. Examiner’s
Currently Earnshaw has high costs of holding stock. The Managing Director wants to Use
introduce lean production methods.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two advantages to Earnshaw of buying raw materials in bulk.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two features of flow production.
Feature 1:..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/11/O/N/13

3
(d) Identify and explain three benefits to Earnshaw of using lean production methods. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) ‘If Earnshaw is to grow in the future then its unit production costs must fall’.
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4
2 Muammar sells boxes of spices to markets. Workers in Muammar’s business are paid on a For
piece rate basis. Table 1 gives financial details of the business in 2012. Examiner’s
Use
Table 1
Fixed costs per month $10 000

Employee wages $2 per box
Raw materials $3 per box
Marketing costs $1 per box
Selling price $8 per box
Sales per month [average] 9000 boxes
(a) Identify two examples of fixed costs for Muammar’s business.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(b) Identify two reasons why sales may vary from month to month.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Calculate the annual profit that Muammar made in 2012.
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/11/O/N/13

5
(d) Identify and explain one advantage and one disadvantage to Muammar of using piece For
rate to pay his workers. Examiner’s
Use
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Muammar is planning to change the selling price of the boxes to $7 each. Do you think
this change would benefit the business? Justify your answer.
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6
3 Yura is the Managing Director of a company that sells holidays. The company organises For
hotels, air flights and car hire for customers. For the first time, the company is going to do Examiner’s
some market research. Secondary sources will be used and a sample of customers will be Use
selected for primary research.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two advantages of using secondary sources.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two methods of sampling that the company could use.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/11/O/N/13

7
(d) Identify and explain two ways of segmenting the market for holidays that the company For
could use. Examiner’s
Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Yura believes that the price is the most important part of the marketing mix for holidays.
Do you think that he is correct? Justify your answer.
..........................................................................................................................................
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8
4 Table 2 gives data about the economy of country C. For

Examiner’s
Use
Table 2
National income
Year per person ($) Inflation (%) Unemployment (%)
2010 650 5 10
2011 640 3 12
2012 600 1.5 18
The economy of country C is in recession. The Government wants to create more jobs by
encouraging more businesses to start up. However some pressure groups are against this
because they think that more businesses will cause more external (social) costs.
(a) What is meant by ‘recession’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two possible reasons why national income per person has fallen between 2010
and 2012.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways that a Government could help new businesses to start up.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/11/O/N/13

9
(d) Identify and explain three external (social) costs that might be caused by an increase in For
the number of businesses in country C. Examiner’s
Use
Cost 1: .............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Cost 2: .............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Cost 3: .............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that new start-up businesses can be successful in country C? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
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10
5 Dmit is a partner in a small retail clothing business. The business has been successful, but it For
is finding it difficult to compete against larger retailers. The partners are thinking of converting Examiner’s
the partnership into a private limited company. Use
(a) Identify two features of a partnership.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why the business might be finding it difficult to compete
against larger retailers.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/11/O/N/13

11
(d) Identify and explain three methods of promotion that the partnership could use to For
increase sales. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Consider the advantages and disadvantages of converting the partnership into a private
limited company. Recommend whether the partners should do this. Justify your answer.
Advantages: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantages: ................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
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* 2 1 5 6 7 0 1 8 8 2 *

1 hour 45 minutes

DC (NF/JG) 63412/3
2
1 Protec makes components for use in computers. The company is located in country Y where For
workers’ wages are high. Table 1 gives data about Protec. Examiner’s
Use
Table 1
Number of employees Average weekly wage Total output per

$ week [units]
400 500 2400
(a) Calculate average labour productivity for Protec.
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two reasons why labour productivity is important for Protec.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways Protec could increase the productivity in its factory.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
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3
(d) Identify and explain three reasons why wages are higher in some countries than others. For
Examiner’s
Reason 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) The management of Protec is thinking of relocating the factory to a country where
wages are lower. Do you think that Protec would benefit from such a move? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

4
2 Party Pops is a business that sells products such as cakes and balloons for childrens’ birthday For
parties. The Marketing Director thinks that the demand for the company’s products is price Examiner’s
elastic. Party Pops advertises on television. The products are sold through the company’s Use
own retail shops. However, the Marketing Director is thinking of changing this to selling only
on the Internet.
(a) Identify two aims of advertising.
Aim 1: ...............................................................................................................................
..........................................................................................................................................
Aim 2: ...............................................................................................................................
..................................................................................................................................... [2]
(b) Identify two methods of pricing that Party Pops could use.
Method 1: .........................................................................................................................
Method 2: .................................................................................................................... [2]
(c) Identify and explain two reasons why the demand for the company’s products is likely to
be price elastic.
Reason 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
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5
(d) Identify and explain two methods of promotion (other than advertising) that Party Pops For
could use to increase sales. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think Party Pops should stop selling through shops and sell only on the Internet?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [6]

6
3 Harry owns a pizza restaurant in a large city. Table 2 gives financial data for the business in For
2012. Examiner’s
Use
Table 2
Selling price per pizza $8

Variable costs per pizza $5
Weekly fixed costs $2700
Weekly sales 1500 pizzas
(a) What is meant by ‘variable costs’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two examples of fixed costs for Harry’s business.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(c) Calculate how much profit Harry’s business makes in one week.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
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7
(d) Harry pays his workers piece rates. Identify and explain one advantage and one For
disadvantage to Harry of using this method of payment. Examiner’s
Use
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Harry is planning to reduce the price of his pizzas to $7 in order to increase sales. Do
you think that this change will benefit his business? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [6]

8
4 Country A has a mix of private sector and public sector enterprises. Figures 1– 3 give some For
data about the two sectors. Examiner’s
Use
Fig. 1: Average hourly Fig. 2: Average hours Fig. 3: Number of

wage worked per week employees in public
sector
10 45 Private Sector 14
Public
millions
hours
Sector 12
8 40
$
Public
6 35 8
Private Sector
Sector
0 0 0
2000 2006 2012 2000 2006 2012 2000 2006 2012
(a) Identify two examples of public sector enterprises.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
..................................................................................................................................... [2]
(b) Identify two aims that public sector enterprises often have.
Aim 1: ...............................................................................................................................
..........................................................................................................................................
Aim 2: ...............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why profits are important to private sector businesses.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/12/O/N/13
9
(d) Consider each of the Figures 1–3. Identify and explain three changes that are shown by For
the data in Figures 1– 3. Examiner’s
Use
Change in Figure 1: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Change in Figure 2: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Change in Figure 3: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that a large decrease in the number of employees in the public sector in
country A will benefit all workers? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

10
5 K & P is a large group of shops selling televisions. The directors of K & P use an autocratic For
management style. Spans of control are narrow and communication is only one-way. Many Examiner’s
workers leave K & P each year and this is a problem for the business. The motivation of the Use
workforce is low as workers feel they are unimportant.
(a) What is meant by ‘autocratic management style’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) What is meant by ‘span of control’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two disadvantages of one-way communication for K & P’s
management team.
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
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11
(d) Identify and explain three methods that K & P could use to improve worker motivation. For
Examiner’s
Method 1: ......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Should K & P try to reduce the number of workers leaving each year? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [6]
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12
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* 8 0 0 5 9 8 8 2 8 1 *

1 hour 45 minutes

DC (NF) 63414/2
2
1 Homeright is a company that makes furniture such as tables and chairs. The company is For
successful and has grown rapidly in recent years. However the directors have found it difficult Examiner’s
to manage the speed of growth. The Managing Director recently said that even more growth Use
is planned for next year. The product range will be doubled and foreign markets entered.
(a) Identify two possible reasons why the directors want Homeright to grow.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
Way 1: ..............................................................................................................................
Way 2: ......................................................................................................................... [2]
(c) Identify and explain two possible problems for Homeright of selling its products in
foreign markets for the first time.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
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3
(d) Identify and explain two problems to Homeright’s management that rapid growth could For
cause. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that the profits of Homeright will continue to increase if the company grows
in the future? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [6]

4
2 Fabian owns a sports shop in the centre of town. The business has high fixed costs. The For
business holds a lot of stock and finds it difficult to finance its working capital. The sale Examiner’s
of sports equipment and clothing is seasonal and some stock sells slowly. ‘I am going to Use
reduce my product range and concentrate on a few sports, such as football, in the future’
said Fabian.
(a) What is meant by ‘fixed costs’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) What is meant by ‘working capital’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two problems for Fabian’s business of holding a lot of stock.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/13/O/N/13

5
(d) Identify and explain three methods of promotion that Fabian could use to increase sales. For
Examiner’s
Method 1: ......................................................................................................................... Use
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that reducing the product range will benefit Fabian’s business? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

6
3 Table 1 gives data about the economy of country A. For

Examiner’s
Use
Table 1
Year Interest rate (%) Average annual wages Unemployment (%)

($)
2010 5 1500 8
2011 7 2000 5
2012 9 2600 2
Country A is experiencing an economic boom. Wages are rising fast and the Government
thinks inflation will soon be a problem. Most business managers think that both interest rates
and taxes will rise again soon.
(a) What is meant by ‘economic boom’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two factors that may influence wage rates in a business.
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two problems to a business caused by high interest rates.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
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7
(d) Identify and explain two ways in which decisions in a business might be affected by a For
rise in taxes. Examiner’s
Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that all businesses will be successful when a country has an economic
boom? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

8
4 Defoe is a private limited company. It manufactures water-pumps using batch production For
methods which are labour intensive. It buys raw materials in small quantities. The Managing Examiner’s
Director wants to increase profits next year. She is planning to introduce capital intensive Use
methods in the factory.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two benefits to Defoe of buying raw materials in small quantities.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two appropriate sources of finance that Defoe could use to invest in
capital intensive methods of production.
Source 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Source 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/13/O/N/13

9
(d) Identify and explain three benefits to Defoe of using capital intensive methods. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Would the employees of Defoe benefit from the change to capital intensive methods of
production? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

10
5 Barts is a bookshop. Its sales have been falling in recent years. Many other booksellers have For
been using e-commerce to sell their goods. The Managing Director of Barts plans to create Examiner’s
a website to sell books. He does not know what other changes to Barts’ marketing mix might Use
be needed.
(a) What is meant by ‘e-commerce’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) What is meant by ‘marketing mix’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two possible reasons why Barts’ sales have fallen in recent years.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 0450/13/O/N/13

11
(d) Identify and explain three pricing methods Barts could use if it sells books through its For
own website. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that Barts should start using e-commerce to sell books? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [6]
© UCLES 2013 0450/13/O/N/13

12
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© UCLES 2013 0450/13/O/N/13

* 3 7 0 3 1 2 0 3 4 9 *

1 hour 45 minutes

DC HB (EL/CGW) 79716/1
2
1 Lu is a sole trader. He manages a bakery shop making and selling bread and cakes. He employs
4 workers all of whom are paid on time rate. Lu wants to expand the business by buying a new
shop and using it as a café (restaurant). He also wants to make a wider range of cakes, such as
wedding and birthday cakes, for which he thinks there is a demand. At present the business sells
all of the bread and cakes it makes.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two methods Lu could use for paying employees (other than time rate).
Method 1: ..................................................................................................................................
Method 2: ..............................................................................................................................[2]
(c) Identify and explain two suitable sources of finance Lu could use to buy a new shop.
Source 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Source 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/O/N/14

3
(d) Identify and explain two methods of promotion that Lu could use for the new range of cakes.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that Lu’s business will be more profitable if he expands it by opening a café in a
new shop? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

4
2 Rakesh manages a car repair business in country Y. He buys cars that are damaged or have parts
missing. Rakesh adds value by repairing these cars until they look like new ones. He employs
5 workers to do the repairs. The business holds a large stock of car parts and Rakesh always pays
cash for these. However Rakesh’s sales are usually on credit.
Table 1: Some information for a typical trading week
Cars bought by Rakesh 6

Average cost of each car $2000
Average cost of parts used per car $500
Weekly wages per employee $1000
Average price per car sold $5000
Number of cars sold 6
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by ‘Rakesh adds value’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Calculate the weekly net profit of the business.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/O/N/14

5
(d) Identify and explain two reasons why the weekly net profit may not be the same as the weekly
net cash flow for Rakesh’s business.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Country Y’s economy is in a recession. Do you think that this will make Rakesh’s business
less successful? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

6
3 Natural Care is a company that makes soap. The business always acts in an ethical way. It follows
fair trade principles by paying fair prices to its suppliers. It uses a cost plus pricing method when
selling its products. Table 2 gives data about the company’s sales of soap and its share of the
national market for soap.
Table 2
Natural Care Market share of
Year sales ($m) Natural Care (%)
2012 40 10
2014 44 7
The Marketing Director of Natural Care wants to introduce a new competitive pricing strategy to
help regain market share. She also wants the Board of Directors to think about changing its ethical
policy.
(a) Calculate the total market sales of soap in 2012.
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why Natural Care’s market share fell in 2014.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to Natural Care of acting in an ethical way by paying fair
prices to its suppliers.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/O/N/14

7
(d) Identify and explain two ways in which Natural Care might be affected by changing to a
competitive pricing strategy.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that customers of products such as soap always benefit from an increase in
competition? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
4 Genel manufactures clothes. The company uses an autocratic style of management. It employs a
large number of workers and pays low wages. Many employees leave the company each year but
they are easily replaced. Working conditions in the factories are poor. Health and safety is ignored
and long hours are worked. Employee motivation is low and employee productivity is falling.
(a) What is meant by an ‘autocratic style of management’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why Genel ignores health and safety in its factory.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two ways in which Genel would benefit from a more motivated workforce.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/O/N/14

9
(d) Identify and explain two ways that Genel could use to improve employee productivity in its
factories.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think Governments should introduce laws to protect employees’ interests in businesses
such as Genel? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]

10
5 Zalpha is a multinational company. It manufactures agricultural machinery and employs a large

number of people. Figure 1 shows a simplified organisation chart for the business. The business
decision making is centralised and some employees complain of poor communications within the
company.
Figure 1
Board of Directors
Managing Director Managing Director Managing Director

Asia Division Europe Division Africa Division
Factory A manager Factory B manager
Quality Warehouse Stock control

manager manager manager
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Using only the information in Figure 1:
(i) Identify the span of control of the Managing Director of the Asia division.
.......................................................................................................................................[1]
(ii) How many levels are there in the chain of command?
.......................................................................................................................................[1]
(c) Identify and explain two possible reasons why Zalpha has poor internal communications.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/O/N/14
11
(d) Identify and explain two advantages to Zalpha of using centralised decision making.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that multinational companies such as Zalpha benefit the countries in which they
operate? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]
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* 1 5 6 2 4 1 0 3 4 5 *

1 hour 45 minutes

DC (EL/JG) 79813/3
2
1 Abdula manages a business partnership that makes sports clothing. The business is working at
full capacity. It employs 12 people who are paid on a piece rate basis. The partners have an
objective to increase profits by 10 % each year for the next 5 years. They are thinking about a joint
venture with another manufacturer of sports clothing as one way of achieving this objective.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two ways of paying workers that the partnership could use (other than by piece rates).
Way 1: .......................................................................................................................................
Way 2: ...................................................................................................................................[2]
(c) Identify and explain two advantages to this business of setting objectives.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/O/N/14

3
(d) Identify and explain two advantages to the partnership of a joint venture with another
manufacturer of sports clothing.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Explain two ways (apart from a joint venture) that the partnership could use to achieve its
objective of a 10 % annual increase in its profit over the next 5 years. Recommend which way
is most likely to be successful. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

4
2 Sarah is the owner of a small business making children’s toys. She sells her toys to retailers on
3 months’ credit. She receives 1 month’s credit from her suppliers. Her cash flow forecast for the
start of 2015 is given below.
Table 1 ($000)
January February March

Cash outflows:
Purchases of stock 12 10 14
Wages X 7 6
Other payments 4 4 4
Total cash outflows 22 Y 24
Net cash flow (7) (1) (5)
Closing balance 3 2 (3)
(a) Calculate the following:
Wages in January (X): ..............................................................................................................
...................................................................................................................................................
Total cash outflows in February (Y): ..........................................................................................
...............................................................................................................................................[2]
(b) Identify two examples of Sarah’s ‘other payments’.
Example 1: ................................................................................................................................
Example 2: ............................................................................................................................[2]
(c) Identify and explain two reasons why the business has a negative closing balance in March.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/O/N/14

5
(d) Identify and explain two advantages to Sarah’s business of producing a cash flow forecast.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Sarah’s accountant told her that a positive cash flow is more important to the business than
profits. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

6
3 Rhiannon Enterprises manufactures ladies clothes. Its best selling products are fashion jeans and
T-shirts. Figure 1 shows sales data for these products. In 2014 the value of the sales of these 2
main products was 50 % of the total sales of the business. The market for ladies’ clothes is very
competitive. In 2013 the business reduced the price of its jeans by 25 %. It is now trying to find
low cost suppliers of cloth to increase its profit margins. Sales of some other products have been
falling despite Rhiannon Enterprises increasing advertising spending on them.
Figure 1
Value of Sales $000

Jeans
175
T-shirts
125
2012 2013 2014
(a) What is meant by a market being ‘very competitive’?
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Calculate the total value of sales of Rhiannon Enterprises in 2014.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible reasons why Rhiannon’s sales of some other products fell
despite an increase in advertising.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/O/N/14
7
(d) Identify and explain two factors that the business should consider before deciding on a new
supplier of cloth.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think Rhiannon Enterprises should reduce the prices of all its products in 2015?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
4 Grenada makes meat products such as pies, burgers and ready-made meals. It employs 10 000
workers. It operates in many countries, each with different laws and traditions. Its organisation
structure is tall and hierarchical. Spans of control are narrow and there is little delegation. Some
middle managers complain that they are not allowed to make important decisions. The directors
want to improve communication with employees.
Figure 2: Organisational structure of Grenada
Board of directors
Senior management
Middle management
Lower management
Other employees
(a) Identify two features of a ‘tall and hierarchical’ organisation structure.
Feature 1: ..................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
...............................................................................................................................................[2]
(b) Use Figure 2 to explain what is meant by ‘chain of command’.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two appropriate ways that the directors of Grenada can use to
communicate with employees.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/O/N/14
9
(d) Identify and explain two disadvantages to Grenada of operating in a number of different
countries.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that Grenada would benefit from greater delegation in its decision making?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

10
5 Ali has just been appointed as Managing Director of Anypart, a large manufacturing business.
He told Anypart’s Board of Directors: ‘Behaving ethically will always lead to lower profits. I want
our employees to work longer hours, have fewer holidays and become more productive. This will
reduce costs of each unit of output and will benefit all our stakeholders’. Not all of the directors
agreed with him.
(a) What is meant by a ‘Board of Directors’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two of Anypart’s stakeholder groups (other than employees).
(c) Identify and explain two benefits to Anypart of reducing costs of each unit of output.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/12/O/N/14

11
(d) Identify and explain two possible ways of improving productivity in Anypart’s business.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that ‘behaving ethically will always lead to lower profits’? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]
© UCLES 2014 0450/12/O/N/14

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* 8 5 0 9 2 6 3 9 9 5 *

1 hour 45 minutes

DC (CW) 79795/2
2
1 Rafa is the Managing Director of Cambridge Fencing (CF), a limited company that makes fences
and gates. The business employs 100 workers. They are paid a low basic wage but can earn high
bonuses for good productivity. Recently a large number of employees have left to work for other
companies. However CF finds it easy to recruit new workers. The business has been successful
but last year its sales and profits fell. Rafa wants this to change.
(a) What is meant by a ‘limited company’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identity two reasons why profits are important to CF.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to CF of its employee payment system.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/13/O/N/14

3
(d) Identify and explain two ways that CF could use to increase its sales.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that it is important that CF reduces the number of employees leaving the
company? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

4
2 The economy of country Z is booming. Its Government wants to create more manufacturing jobs
by making it easier for new businesses to start up and build new factories. Recently a Government
minister said: ‘All new businesses will be successful during a boom’. Controls on where new
factories can be built are to be removed. Some pressure groups are against this idea because
they believe that new businesses create external (social) costs.
(a) Identify two features of a ‘boom’.
Feature 1: ..................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by a ‘pressure group’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two external (social) costs that might be created by building new factories.
Cost 1: ......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Cost 2: ......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/13/O/N/14

5
(d) Identify and explain two ways that a Government could use to encourage new businesses to
start up (other than removing controls on where factories can be built).
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) ‘All new businesses will be successful during a boom.’ Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

6
3 Kruger manufactures advanced technology products such as computers and mobile (cell) phones.
Some of its products are in the maturity stage of their product life cycle. Technology markets
are very competitive. Rival businesses are always introducing new products. Kruger’s Marketing
Director would like to see better market segmentation and increased brand awareness of products.
She also wants the company to launch new products.
(a) What is meant by ‘the maturity stage’ of a product life cycle?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two costs to Kruger of launching a new product.
Cost 1: ......................................................................................................................................
...................................................................................................................................................
Cost 2: ......................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two ways Kruger could increase consumers’ brand awareness of its
mobile phones.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/13/O/N/14

7
(d) Identify and explain two ways of segmenting the mobile phone market.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Recommend an appropriate pricing strategy to Kruger for a new mobile phone. Justify your
answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
4 Juta owns a business that makes soft toys. The variable cost per toy is $20. She buys her raw
materials from suppliers in other countries. In 2013 she sold 10 000 toys.
Table 1: Extract of Juta’s accounts for 2013 ($)
Sales 350 000

Cost of sales X
Fixed costs Y
Net profit 70 000
(a) Calculate:
Cost of sales (X): ......................................................................................................................
...................................................................................................................................................
Fixed costs (Y): .........................................................................................................................
...............................................................................................................................................[2]
(b) Calculate the net profit margin of the business in 2013.
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) (i) What is meant by ‘fixed costs’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
.......................................................................................................................................[2]
(ii) Identify two examples of fixed costs of Juta’s business.
Example 1: ........................................................................................................................
Example 2: ....................................................................................................................[2]
© UCLES 2014 0450/13/O/N/14

9
(d) Identify and explain two problems that Juta might have when buying stock from suppliers in
other countries.
Problem 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Problem 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) In 2014 sales of the business increased by $150 000 and net profit increased by $10 000. Do
you think that the business was more successful in 2014 than in 2013? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

10
5 Salters manufactures cans for drinks. It uses flow production methods. Its machinery is inefficient
and often breaks down. The company holds a lot of stock of raw materials and finished products.
It cannot respond quickly to changes in customer demand. The management is planning to invest
in new machinery, although the capital costs would be high. The factory employees are worried
about this plan and strike action is possible. In 2013 Salters made a loss.
(a) Identify two features of flow production methods.
Feature 1: ..................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by ‘inefficient’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two problems to Salters of not responding quickly to changes in customer
demand.
Problem 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Problem 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/13/O/N/14

11
(d) Identify and explain two effects on Salters of holding a high level of stock.
Effect 1: .....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Effect 2: .....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think Salters should invest in new machinery? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
© UCLES 2014 0450/13/O/N/14

12
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© UCLES 2014 0450/13/O/N/14

* 6 6 3 3 9 1 5 9 5 6 *

1 hour 30 minutes

DC (RCL (KM)) 97979/3

2
1 TWH makes a range of toys using batch production. TWH’s Managing Director, Dylan, plans to
invest in new technology to reduce average costs. ‘It’s the only way to increase efficiency as I do
not know how we can improve employees’ motivation’ he said. Dylan cannot decide on whether it
would be better to use retained profits or a long term loan as the source of finance.
Table 1: Data for 2014
Number of toys made per week 260 000

Average wage per hour paid by TWH $6
Average wage per hour paid by similar businesses $6.50
(a) What is meant by ‘average cost’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Calculate the output per employee per week in 2014.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible advantages to TWH of using batch production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2015 0450/11/O/N/15

3
(d) Identify and explain two ways that TWH could improve the motivation of its employees.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) TWH can either use retained profit or a long term loan to finance the purchase of new
technology. Which option do you recommend TWH should use? Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
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4
2 Ramford is a private limited company. It has four factories which make a wide range of food
products including breakfast cereal and ice cream. The Finance Director is worried about the
company’s financial performance. She has read that many businesses failed in the last year. ‘I
think we are suffering from diseconomies of scale’ she said. Ramford’s directors have decided to
cut the number of different products it makes from 80 to 10.
Table 2: Extract from accounts
2013 2014
Revenue (sales) ($m) 200 150
(Net) profit ($m) 70 60
Capital employed ($m) 280 300
(Net) profit margin 35% ?
Return on Capital Employed 25% ?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two causes of business failure.
Cause 1: ....................................................................................................................................
...................................................................................................................................................
Cause 2: ....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two diseconomies of scale that Ramford might be experiencing.
Diseconomy 1: ...........................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Diseconomy 2: ...........................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
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(d) Identify and explain two factors that Ramford should consider when deciding which products
to remove from its product range.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Finance Director is right to be worried about the financial performance of
Ramford in 2014? Justify your answer using the data in Table 2 and appropriate ratios.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]

6
3 Grimshaw manufactures mobile (cell) phones for the mass market. Last year its market share
increased by 3%. The Managing Director is planning to set up a new factory in country T to supply
the mobile phone market in that country for the first time. Grimshaw plans to sell a new model of
mobile phone. The Managing Director has asked for market research to be done. He said: ‘As a
multinational, we can set up a new factory anywhere; I want to know whether the Government of
country T will offer us any help to build our factory there.’
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by ‘market share’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages of market research to Grimshaw.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
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7
(d) Identify and explain two advantages to Grimshaw of developing new products.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Government of country T should help businesses such as Grimshaw set up
in its country? Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
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...............................................................................................................................................[6]

8
4 Tebo has recently been made redundant from his job as a car mechanic. He is thinking of setting
up his own business. Even though he has no management experience, he knows that managing
cash flow will be important to the success of the business. Tebo is considering whether to apply for
a FIXIT franchise. This franchise would cost $15 000, which would use all of his savings. FIXIT is a
car repair franchise, with 36 franchisees.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two functions of management that Tebo might have to perform.
Function 1: .................................................................................................................................
...................................................................................................................................................
Function 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Explain why managing cash flow will be important for Tebo’s business.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[4]
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9
(d) Identify and explain two factors Tebo should consider when deciding where to locate his
business.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that buying a FIXIT franchise is the best way for Tebo to start his business?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]
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* 9 0 1 4 3 9 2 8 4 1 *

1 hour 30 minutes

DC (RCL (KM)) 97977/5

2
1 Walt owns a company which has developed a new computer game for adults. A focus group report
shows customers like it. Walt has been considering the marketing mix, including the packaging
for this product which is likely to be sold in many countries. ‘I don’t want to use a wholesaler as it
would affect my profit margin’ he said.
(a) What is meant by a ‘focus group’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two reasons why packaging might be important for the new computer game.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...............................................................................................................................................[2]
(c) Explain why the profit margin might be important for Walt’s business.
...................................................................................................................................................
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3
(d) Identify and explain two advantages to Walt if he decided to use a wholesaler to distribute his
products.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Consider two possible methods of promotion that Walt could use for the new game.
Recommend which method he should use. Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

4
2 CLW makes wood furniture, including chairs and tables. Demand has risen quickly over the past
3 years and the business needs to increase the scale of production at its factory. The factory is
located near the city centre in an area of low unemployment. The Finance Director has produced a
business plan, including a balance sheet. The Finance Director is pleased with CLW’s liquidity.
Table 1: Extract of financial information
2013 2014
Non-current (fixed) assets ($m) 240 260
Current assets:
Inventory (stock) ($m) 180 330
Trade receivables (debtors) ($m) 320 240
Cash ($m) 100 90
Total current assets ($m) 600 660
Current Liabilities ($m) 480 440
Current ratio 1.25:1 ?
Acid test ratio 0.875:1 ?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by a ‘balance sheet’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible benefits for CLW of holding high inventory (stock) levels.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
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5
(d) Identify and explain two factors (other than finance) that CLW’s management need to consider
when increasing the scale of production.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Finance Director is right to be pleased with the liquidity of CLW in 2014?
Justify your answer using the data in Table 1 and appropriate ratios.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

6
3 NCE manufactures cars in 4 factories using flow production. NCE’s Human Resources Director
thinks good induction training helps achieve high productivity. Factory X is its most efficient factory.
Last year the size of the new car market fell by 20%. NCE now has to make 400 workers redundant
at one of its other factories. ‘I am pleased NCE is a large business’, said the HR Director, ‘I think a
small business cannot survive in this competitive market.’
Table 2: NCE operations data for 2014
Number of cars made Number of employees

168 000 2800
(a) What is meant by ‘flow production’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Calculate the output per employee in 2014.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two ways in which induction training might benefit NCE.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
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7
(d) Identify and explain two factors that NCE would need to consider in deciding which workers
to make redundant.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The HR Director thinks that ‘a small business cannot survive in this competitive market’.
Do you agree with this view? Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
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...............................................................................................................................................[6]

8
4 Nellis is a public limited company. It specialises in building large luxury houses. Over the past
3 years its profits have increased as the country is experiencing an economic boom. ‘It’s not all
good news – the Government has announced plans to increase interest rates and introduce new
legal controls to protect the environment’ said the Managing Director. He believes these new legal
controls to protect the environment will only make businesses (such as Nellis) less profitable.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two stages (other than boom) of the business cycle.
Stage 1: .....................................................................................................................................
Stage 2: .................................................................................................................................[2]
(c) Explain how a rise in interest rates might affect Nellis.
...................................................................................................................................................
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...............................................................................................................................................[4]
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9
(d) Identify two stakeholder groups. Explain why each group is important to this business.
Explanation: ...............................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The Managing Director believes that the new legal controls to protect the environment will
only make businesses (such as Nellis) less profitable. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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* 1 9 4 2 4 4 0 0 3 3 *

1 hour 30 minutes

DC (RCL (JDA)) 97976/4

2
1 PYG is a private limited company based in country A. PYG makes metal cans for food products
using flow production. The Operations Director has been looking at the operations data in Table 1.
Last year PYG found it difficult to replace the 15 production workers who left the company. Most
of PYG’s output is exported. The Operations Director thinks there could be more advantages than
disadvantages to relocating production to another country.
Table 1: Operations data
2013 2014
Output per week 660 000 800 000
Number of employees 20 25
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[2]
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two reasons why calculating output per employee is important for PYG.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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3
(d) Identify and explain two possible problems for PYG of using flow production.
Problem 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Problem 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that the advantages of relocating production to another country would be greater
than the disadvantages for PYG? Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
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...............................................................................................................................................[6]

4
2 Toddles is a children’s nursery. It is a tertiary sector business which provides childcare for children
aged 2–5 years. It is a sole trader business. The business employs 4 full-time workers, who are
all fully trained and well-motivated. Each employee looks after 3 children. Last year, Toddles made
a loss. ‘I don’t understand it, we have fantastic employees and a good location’ said the owner. ‘I
need to find ways to make the business profitable.’
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two ways (other than training) that Toddles could use to motivate its employees.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to Toddles of having fully trained employees.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2015 0450/13/O/N/15

5
(d) Identify and explain two possible reasons why profit is important for businesses like Toddles.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Explain two ways in which Toddles could become profitable. Recommend which way Toddles
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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6
3 QF Group manufactures a range of electrical products such as computers and televisions. All QF
managers have a wide span of control so delegation is important. The main objective of QF Group
is growth. The Finance Director has been looking at the accounting data in Table 2. She is pleased
about the performance of the business.
2013 2014
Gross profit margin 50% 45%
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by ‘delegation’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two reasons why delegation might be important to businesses like QF
Group.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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7
(d) Identify two stakeholder groups. Explain why each of these stakeholder groups might support
QF Group’s objective of growth.
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Finance Director is right to be pleased about the performance of QF Group?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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8
4 Xiolom is a mining business in the private sector. It is a large company employing over 100 000
employees. It has operations in 10 countries. The Operations Director has announced plans to
open a new mine in country G. He is angry. ‘First it is new legal controls over employment and
now I have to deal with pressure groups. The mine will create 8000 jobs. Xiolom creates external
benefits so it should be allowed to expand!’
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two limitations of using ‘number of employees’ as a method of measuring business
size.
Limitation 1: ..............................................................................................................................
...................................................................................................................................................
Limitation 2: ..............................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two ways a pressure group might try to influence Xiolom‘s decision to
open the new mine in country G.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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9
(d) Identify and explain two ways in which Xiolom might be affected by new legal controls over
employment.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The Operations Director believes that because Xiolom creates external benefits it should be
allowed to expand. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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*8893390752*

1 hour 30 minutes


11_0450_11_2016_1.12
2
1 C&C has a good reputation for making high quality, hand-made shoes. It has 120 full-time skilled
employees. C&C needs to recruit another 20 production employees to meet increased demand.
The Managing Director said: ‘I don't know why people worry about globalisation. Two years ago
we did not export, now exports are 10% of our output and increasing.’ C&C has orders for 100 000
pairs of shoes in 2017. The Managing Director cannot decide whether to introduce new technology
into the production process.
(a) What is meant by ‘globalisation’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible threats to C&C from globalisation.
Threat 1:............................................................................................................................
...........................................................................................................................................
Threat 2:............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two suitable ways in which C&C might advertise the job vacancies.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
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3
(d) Identify and explain two benefits to C&C of having full-time employees.
Benefit 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think C&C should introduce new technology into the production process? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2016 11_0450_11_2016_1.12 [Turn over

4
2 Dowson is a large business which owns a number of shops. It sells a range of electrical goods such
as computers and televisions. The Finance Director has been looking at some recent financial data,
as shown in Table 1. He is pleased with Dowson's liquidity but knows he must reduce its high level
of debt including an overdraft of $6m. He said: 'The economy is in recession. Many small retailers
have failed. Size is an advantage!’
Table 1: Extract of financial data for Dowson
2015 2016
Revenue $280m $300m
Profit $175m $180m
Current ratio 1.2:1 1.5:1
Acid test ratio 0.8:1 0.5:1
Return on capital employed 10% 10%
(a) What is meant by ‘Return on capital employed’?
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(b) What is meant by a ‘recession’?
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(c) Identify and explain two ways in which the size of the business may benefit Dowson.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two problems for Dowson of having a high level of debt.
Problem 1:.........................................................................................................................
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Explanation:.......................................................................................................................
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Problem 2:.........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think the Finance Director is right to be pleased with the liquidity of the business?
Justify your answer using the ratio results in Table 1.
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© UCLES 2016 11_0450_11_2016_1.12 [Turn over

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3 YOGO is a new business which Amelia has just set up using Government support. YOGO makes
a range of sweets (candy) targeted at adults. It is a niche market. Amelia has been looking at the
marketing part of her business plan. She has to decide which pricing method to use. Amelia is
spending a lot of money on packaging. She did not do any primary market research as she thinks
she can use secondary data to make decisions. She believes that all adults like sweets.
(a) Identify two reasons why a Government might support business start-ups.
Reason 1:..........................................................................................................................
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Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two parts (other than marketing) of a business plan.
Part 1:................................................................................................................................
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Part 2:................................................................................................................................
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(c) Identify and explain two possible pricing methods that Amelia might use.
Method 1: ..........................................................................................................................
Explanation:.......................................................................................................................
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Method 2:...........................................................................................................................
Explanation:.......................................................................................................................
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(d) Identify and explain two reasons why packaging is important for YOGO’s products.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think Amelia’s business would benefit from primary market research? Justify your
answer.
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© UCLES 2016 11_0450_11_2016_1.12 [Turn over

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4 DCP makes a range of high quality industrial paints. It sells direct to 6 large business customers
which are located in different countries. DCP charges a price of $0.35 per litre. It operates in a
competitive market. The Operations manager has been looking at DCP's costs as shown in Table 2.
He wants to increase profit but he does not want to buy cheaper materials.
Table 2: Output and cost information for DCP per week
Output (litres) 1 500 000

Total fixed costs ($) 350 000
Total material costs ($) 60 000
Total labour costs ($) 40 000
(a) Identify two functions of management.
Function 1:.........................................................................................................................
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Function 2:.........................................................................................................................
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(b) Calculate DCP's average cost per litre.
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(c) Identify and explain two ways in which DCP might communicate with its customers.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two possible reasons why quality is important to DCP.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think that charging a higher price is the best way for DCP to increase profit? Justify
your answer.
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1 hour 30 minutes


11_0450_12_2016_1.10
2
1 APQ is a multinational company. It makes chemicals that are sold to farmers which help increase
the amount of food produced. It plans to open a factory in country X, a developing country with low
interest rates. The Finance Director said: ‘This factory will create many external benefits. APQ is
a public limited company which tries to act in an ethical way with all its stakeholder groups.' The
new factory will cost $100m and there will be an opportunity cost for APQ. The Finance Director
cannot decide which source of finance to use for the new factory.
(a) What is meant by ‘opportunity cost’?
...........................................................................................................................................
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(b) Identify two possible external benefits that might result from the new factory.
Benefit 1:...........................................................................................................................
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Benefit 2:...........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to APQ of being a multinational company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify two stakeholder groups of APQ. Explain how APQ could act in an ethical way with
each stakeholder group.
Stakeholder group 1:.........................................................................................................
Explanation:.......................................................................................................................
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Explanation:.......................................................................................................................
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(e) Explain two suitable sources of finance that APQ could use for the new factory. Recommend
which source of finance APQ should use. Justify your answer.
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© UCLES 2016 11_0450_12_2016_1.10 [Turn over

4
2 $LAND sells a wide range of products from food to toys. It has 400 shops in country B. $LAND's
marketing strategy is based on penetration pricing. $LAND does no advertising and buys all its
products directly from manufacturers. Revenue and profit have increased despite the country being
in recession. The Marketing Director wants to expand the business by opening shops in other
countries. He believes $LAND will be successful in other countries.
(a) What is meant by ‘marketing strategy’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) What is meant by ‘penetration pricing’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Identify and explain two possible advantages to $LAND of advertising.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify and explain one advantage and one disadvantage to $LAND of buying direct from
manufacturers.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think that $LAND will be successful in other countries? Justify your answer.
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© UCLES 2016 11_0450_12_2016_1.10 [Turn over

6
3 TKF makes furniture such as beds and tables using job production. TKF has 3 part-time office
employees, 8 production workers and 1 manager who is expected to carry out quality control. As
the factory is busy, most communication is by email. After a number of customer complaints, the
manager thinks TKF has some communication barriers. He believes good internal communication
can help TKF be more efficient. The manager is also worried about TKF’s cash flow position.
Table 1: Cash flow forecast for TKF ($000)
December January February
Cash in 35 20 29
Cash out 29 25 26
Net cash flow 6 (5) 3
Opening balance (3) 3 (2)
Closing balance 3 (2) 1
Figures in brackets are negative.
(a) What is meant by ‘job production’?
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© UCLES 2016 11_0450_12_2016_1.10

7
(c) Identify and explain two possible communication barriers for TKF.
Barrier 1:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Barrier 2:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two ways in which good internal communication can help TKF be more
efficient.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2016 11_0450_12_2016_1.10 [Turn over

8
(e) Do you think the manager is right to be worried about TKF’s cash flow position? Justify your
answer.
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4 Moeen and Ali plan to start up a small luxury hotel in the centre of a city in country R. They have
a budget of $30 000 to pay for all costs. After researching different types of business organisation,
as shown in Table 2, Moeen thinks the hotel should be a private limited company. If the business
is to be successful, Ali knows choosing the right location will be important. He cannot decide whether
to recruit full-time or part-time employees.
Table 2: Private sector business organisations in country R (millions)
Sole trader 3.0

Partnership 0.5
Private limited company 1.2
Other types of business organisation 0.3
Way 1:................................................................................................................................
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Way 2:................................................................................................................................
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(b) Calculate the percentage (%) of businesses in country R which are partnerships.
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(c) Identify and explain two advantages to Moeen and Ali of forming a private limited company.
Advantage 1:.....................................................................................................................
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Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two factors that might influence Ali’s choice of location for the business.
Factor 1:............................................................................................................................
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Explanation:.......................................................................................................................
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Factor 2:............................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think it would be better for the business to use full-time or part-time employees? Justify
your answer.
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1 hour 30 minutes


11_0450_13_2016_1.11
2
1 UDig is a large mining company in the private sector. It supplies businesses in country B with 30%
of the coal they need. UDig now has eight mines but plans to close two of them and this will threaten
1800 employees with redundancy. The Managing Director said: ‘I blame the appreciation of country
B’s exchange rate and new legal controls including those to protect the environment. The
Government should help UDig keep these mines open.’
(a) What is meant by ‘private sector’?
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(c) Identify and explain two ways an appreciation of country B’s exchange rate might affect UDig.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two ways in which legal controls might affect UDig.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(e) The Managing Director thinks ‘the Government should help UDig keep these mines open’.
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© UCLES 2016 11_0450_13_2016_1.11 [Turn over

4
2 GBU is a public limited company. It makes a range of beauty products including shampoo and
soaps for the mass market. Last year GBU’s revenue fell. The Marketing Director has been looking
at the results from its primary market research based on a sample of 2000 consumers. An extract
is shown in Fig. 1. She believes maintaining customer loyalty is more important than attracting new
customers.
Where do you buy Would you buy

your beauty products? our beauty products?
mail no
order shop 300
200 1100
online yes
700 1700
Fig. 1: Extract from GBU’s market research
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(b) Calculate the percentage (%) of consumers who buy beauty products online.
...........................................................................................................................................
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(c) Identify and explain two possible reasons why GBU's market research might not be useful to
the Marketing Director.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2016 11_0450_13_2016_1.11

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(d) Identify and explain two advantages to GBU of using shops as a channel of distribution.
Advantage 1:.....................................................................................................................
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Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think maintaining customer loyalty should be more important to GBU than attracting
new customers? Justify your answer.
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© UCLES 2016 11_0450_13_2016_1.11 [Turn over

6
3 Izaak owns a small fish restaurant. He employs two chefs (cooks) and three workers who serve in
the restaurant. He has been trying to increase added value to improve profits. Izaak has been
looking at the business accounts as shown in Table 1. He thinks fixed costs are too high. Izaak
has received a number of complaints about food and service. He knows he must improve quality
but cannot decide the best way to do this.
Table 1: Extract from income statements for years ending 30 September 2015 and 2016
($000)
2015 2016
Revenue 300 300
Cost of sales 180 150
Expenses 90 135
Profit 30 15
(a) What is meant by ‘added value’?
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(b) What is meant by ‘cost of sales’?
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(c) Identify and explain two ways Izaak could increase revenue.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two problems that low quality might cause for Izaak’s business.
Problem 1:.........................................................................................................................
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Explanation:.......................................................................................................................
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Problem 2:.........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think Izaak should be pleased with the financial performance of his business?
Justify your answer using appropriate ratios.
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© UCLES 2016 11_0450_13_2016_1.11 [Turn over

8
4 ReBag is a social enterprise. Asha started the business three years ago using micro-finance. ReBag
employs 30 women in four small towns in different parts of the country. They work from home and
make a range of bags from pieces of old fabric (cloth). Last year ReBag’s revenue was $700. Asha
said: ‘Our external stakeholders want ReBag to employ women in five more towns. Getting a bank
loan to expand the business will be a problem. What will I do about management? How will I
communicate? I cannot keep visiting everyone.’
(a) What is meant by a ‘social enterprise’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Identify two functions of management (other than communication) that Asha performs.
Function 1:.........................................................................................................................
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Function 2:.........................................................................................................................
........................................................................................................................................... [2]
(c) Identify two external stakeholder groups of ReBag. Explain why each stakeholder group might
be interested in this business.
External stakeholder group 1:............................................................................................
Explanation:.......................................................................................................................
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External stakeholder group 2:............................................................................................
Explanation:.......................................................................................................................
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© UCLES 2016 11_0450_13_2016_1.11

9
(d) Identify and explain two possible reasons why it might be difficult for ReBag to get a bank
loan.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Explain two possible methods Asha could use to communicate with ReBag workers.
Recommend which method she should choose. Justify your answer.
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*7197256577*

1 hour 30 minutes

11_0450_11_2017_1.8
2
1 Ella has just left college and wants to start up her own business. She has designed a new bicycle
light with a safety feature not found in any rival products. Ella knows obtaining finance will be difficult.
She plans to have the lights produced in another country. Each light will cost $8 to produce. Ella
cannot decide whether to use price skimming. She said: ‘I have received orders for 300 lights and
I have not even started promoting them’. Ella wants to be a successful entrepreneur.
Table 1: Information on possible promotion options for Ella’s bicycle light.
Option 1: Set up her own website Option 2: Advertise in specialist

magazine
Cost information $500 for web page to show product $300 for full page colour
specifications and contact details advertisement
Other information For extra $750 website would allow One of the most popular cycling
customers to order online magazines in the country.
(a) Identify two characteristics of a successful entrepreneur.
Characteristic 1:.................................................................................................................
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Characteristic 2:.................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons why Ella plans to produce the lights in another country.
Reason 1:..........................................................................................................................
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Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why obtaining finance might be difficult for Ella’s business.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2017 11_0450_11_2017_1.8

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(d) Identify and explain one advantage and one disadvantage to Ella of using price skimming.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Recommend which promotion option Ella should choose. Justify your answer using the
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© UCLES 2017 11_0450_11_2017_1.8 [Turn over

4
2 NMBJ makes a range of cookies (biscuits) using batch production. Last year profit increased by
$1.5 million. The directors think this is because of an increase in productivity and better management
of working capital. NMBJ has a low level of inventory. NMBJ plans to increase the wages of all 300
employees by $50 per month from March. The Finance Director is worried: ‘This decision will add
$15 000 to wages each month. Many employees are leaving. Is paying higher wages the best way
to improve motivation?’
Table 2: Cash flow forecast for the period January - March 2018 ($ 000)
Cash outflows:
Wages 60 60 X
Other costs 500 480 520
Opening balance 5 W (15)
Closing balance 5 (15) Z
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might need working capital.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Calculate the following values shown on the cash flow forecast.
W : ......................................................................................................................................
X : .......................................................................................................................................
Y : .......................................................................................................................................
Z : ....................................................................................................................................... [4]
© UCLES 2017 11_0450_11_2017_1.8

5
(d) Identify and explain one advantage and one disadvantage to NMBJ of having a low level of
inventory.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think paying higher wages is the best way for NMBJ to improve employee motivation?
...........................................................................................................................................
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© UCLES 2017 11_0450_11_2017_1.8 [Turn over

6
3 GDC is a transport delivery business in country Z. It operates in a competitive market. GDC has
5000 employees and 1000 delivery vehicles. GDC’s organisational structure has many levels of
hierarchy with a long chain of command. The managers use an autocratic leadership style. Last
year GDC delivered 2 billion parcels for businesses. The Managing Director said: ‘Having a good
reputation is important. We have also benefited from economies of scale’. GDC wants to expand
its operations to another country, but cannot decide the best way to do this.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘autocratic leadership style’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage of GDC’s organisational structure.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_11_2017_1.8

7
(d) Identify and explain two reasons why a good reputation might be important to GDC.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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........................................................................................................................................... [6]
(e) Recommend the most suitable way for GDC to expand its business to another country. Justify
your answer.
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© UCLES 2017 11_0450_11_2017_1.8 [Turn over

8
4 CHONS is a public limited company. The directors want to open a new coal mine. All the coal will
be exported. The Managing Director is hopeful that the Government will allow the coal mine to be
opened. She said: ‘CHONS always meets legal controls. In an area of high unemployment surely
creating jobs is more important than protecting the environment. Most stakeholder groups including
shareholders and suppliers are happy. CHONS will not be asking for any Government support.’
Table 3: Information about the proposed coal mine
Planned output 50m tonnes per year
Number of years coal mine will operate 60 years
Jobs created 10 000
Level of waste products causing pollution High
Risk of traffic problems High
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two ways (other than legal controls) that a government might use to influence business
decisions.
Way 1:................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage of CHONS being a public limited
company.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_11_2017_1.8

9
(d) Identify and explain two ways in which legal controls might affect CHONS.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the Government should allow CHONS to open the coal mine? Justify your answer
using the information in Table 3.
...........................................................................................................................................
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*8014975208*

1 hour 30 minutes


11_0450_12_2017_1.8
2
1 FlyAway is an airline business. It is in the tertiary sector. It offers low-price flights for business
customers in country J. Customers have to pay extra for luggage and food on the flight. It is a very
competitive market. The Marketing manager knows that improving customer service is important.
Bookings and advertising are done through FlyAway’s ticket shops and its website. The Marketing
manager cannot decide whether to close its ticket shops and use only e-commerce.
Table 1: Selected information about two of FlyAway’s routes
Route Average number of Average price per ticket Break-even number of

passengers per flight ($) passengers per flight
1 85 80 70
2 110 60 90
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the revenue gained from an average flight on route 2.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which break-even information could help FlyAway.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_12_2017_1.8

3
(d) Identify and explain two ways in which FlyAway could improve customer service.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think FlyAway should use only e-commerce? Justify your answer.
...........................................................................................................................................
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...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2017 11_0450_12_2017_1.8 [Turn over

4
2 CGM makes high quality shoes using job production. The production method makes use of
specialisation. CGM operates in a niche market. CGM managers know that all business activity
creates external costs, so they always try to act in ways that protect the environment. The Operations
Director wants to increase profit. CGM could either buy cheaper raw materials or introduce new
technology into the production process. The new technology would cost $30 000 and could reduce
the number of employees from 30 to 26.
(a) Identify two advantages of specialisation.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘external cost’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which CGM could try to protect the environment.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_12_2017_1.8

5
(d) Identify and explain one advantage and one disadvantage to CGM of using job production.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think CGM should introduce new technology into the production process? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2017 11_0450_12_2017_1.8 [Turn over

6
3 Yanis owns a busy restaurant in the city centre. He employs 4 skilled chefs and 6 workers to serve
in the restaurant. All employees are on part-time contracts. The chefs are paid a high hourly wage
rate, but receive no bonuses. Yanis is worried that too many chefs leave. He is thinking of other
ways in which he could motivate the chefs. Yanis wants to open another restaurant but is worried
about problems linked to growth. He has prepared a balance sheet as part of his business plan.
An extract is shown in Table 2. The current ratio was 1.2:1 in 2016.
Table 2: Extract from balance sheet as at 30 September 2017 ($ 000)
Current assets 60
(a) Identify two main parts (other than finance) of a business plan.
Part 1:................................................................................................................................
Part 2:................................................................................................................................ [2]
(b) What is meant by ‘non-current assets’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) (i) Calculate the current ratio as at 30 September 2017.
................................................................................................................................
................................................................................................................................ [2]
(ii) Explain what the two current ratio results show about Yanis’s business.
................................................................................................................................
................................................................................................................................
................................................................................................................................ [2]
© UCLES 2017 11_0450_12_2017_1.8

7
(d) Identify two possible problems for Yanis if he expands his business. Explain what he might
do to overcome each problem.
Problem 1:.........................................................................................................................
...........................................................................................................................................
Explanation of how to overcome the problem:..................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2:.........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Yanis should change the way he motivates his chefs? Justify your answer.
...........................................................................................................................................
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© UCLES 2017 11_0450_12_2017_1.8 [Turn over

8
4 VIS provides a range of insurance services including insurance for cars and electrical products.
Last year retained profit decreased. The Managing Director blames higher taxation and also thinks
that some markets have become more competitive. Customer complaints have also increased.
The Managing Director plans to change the business organisational structure by removing both
the regional directors and regional managers. She said: ‘Shorter chains of command may help. I
know some employees may need training.' She cannot decide on a suitable method of
communication to inform employees about the changes to the organisational structure.
(a) Identify two reasons why markets can become more competitive.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two methods of training that a business might use.
Method 1:...........................................................................................................................
Method 2:........................................................................................................................... [2]
(c) Identify and explain two ways in which higher taxation might affect VIS.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_12_2017_1.8

9
(d) Identify and explain two advantages to VIS of changing its organisational structure.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend the best method of communication VIS should use to inform employees about
the changes to its organisational structure. Justify your answer.
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
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*2156920051*

1 hour 30 minutes


11_0450_13_2017_1.9
2
1 HGH makes truck (lorry) engines using batch production. Quality assurance is important. Last year
profit decreased by 30%. The Managing Director has decided to close one of its two factories
based on the information in Table 1. He said: ‘The problems are high energy costs and increased
competition from imports. The Government should introduce measures such as import quotas to
help protect businesses like us. If it does not then both factories may close'.
Table 1: Cost and other information about the two factories
Factory 1 Factory 2
Output per month 1200 1260
Number of employees 150 140
Labour productivity per month 8 X
Level of trade union membership High Low
Rent of site per month $200 000 $300 000
(a) What is meant by 'quality assurance'?
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Calculate the value of X from Table 1.
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Identify and explain two ways the Government might help HGH become more competitive.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_13_2017_1.9

3
(d) Identify and explain one advantage and one disadvantage to HGH of using batch production.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend which factory HGH should close. Justify your answer using the information in
Table 1.
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2017 11_0450_13_2017_1.9 [Turn over

4
2 BBT makes a range of breakfast cereals. One of BBT’s objectives is to act in an ethical way with
all of its stakeholders. The Marketing Director has been looking at BBT’s marketing strategy for
some of its products. BBT uses competitive pricing. She thinks that product A, one of its popular
brands, is in the decline stage of the product life cycle. She cannot decide what to do with product A.
Table 2: Information about BBT’s products
Product A Product B Product C
Revenue 2016 $500 000 $360 000 $120 000
% Change in revenue compared to 2015 -40% +30% +50%
Years in market 10 5 2
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons for a business to set objectives.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which BBT could act in an ethical way.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_13_2017_1.9

5
(d) Identify and explain one advantage and one disadvantage to BBT of using competitive pricing.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think BBT should stop selling product A? Justify your answer.
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2017 11_0450_13_2017_1.9 [Turn over

6
3 ZumGo is a business partnership between two brothers Richie and Justin. It provides bus tours for
people wanting to go on holiday. After two successful years, Justin wants to expand the business
by buying another bus. This will cost $28 000. When Richie produced the cash flow forecast as part
of ZumGo’s business plan he forgot to include the $6000 for advertising in March. They cannot
decide whether to lease the bus or use all their retained profit to buy one. Leasing would cost $1000
per month for 2 years.
Table 3: Cash flow forecast for 3 months ending 31 March 2018 ($)
Cash in 36 000 36 000 30 000
Cash out:
Advertising 12 000 0 6000
Other costs 24 000 25 000 22 000
Total cash outflow: 36 000 25 000 W
Net cash flow 0 11 000 X
Opening balance (15 000) (15 000) Y
Closing balance (15 000) (4000) Z
(a) What is meant by ‘business plan’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two financial documents (other than a cash flow forecast) that a business might use.
Document 1:......................................................................................................................
Document 2:...................................................................................................................... [2]
(c) Calculate the values of W, X, Y and Z.
W : ......................................................................................................................................
X : .......................................................................................................................................
Y : .......................................................................................................................................
Z : ....................................................................................................................................... [4]
© UCLES 2017 11_0450_13_2017_1.9

7
(d) Identify and explain one advantage and one disadvantage of ZumGo being a business
partnership.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Which source of finance do you think ZumGo should use for the new bus? Justify your answer.
...........................................................................................................................................
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© UCLES 2017 11_0450_13_2017_1.9 [Turn over

8
4 CYB is an accountancy business. It has 30 highly skilled employees. They work in small teams to
prepare customers' final accounts including those of many multinational companies. CYB believes
effective communication is important to its success. The Human Resources Director needs to recruit
3 new accountants. She said: ‘External recruitment is not easy particularly during an economic
boom. The new recruits will also need either on-the-job or off-the-job training in our computerised
accountancy system.’
(a) What is meant by ‘multinational company’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘economic boom’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two methods that CYB could use to communicate with its customers.
Method 1:...........................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2:...........................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_0450_13_2017_1.9

9
(d) Explain how each of the following stages could help CYB in the recruitment process.
Person (job) specification:.................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advertising the job vacancies: ..........................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think it would be better for CYB to use on-the-job or off-the-job training? Justify your
answer.
...........................................................................................................................................
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...........................................................................................................................................
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*6225071318*

1 hour 30 minutes

11_0450_11_2018_1.12
2
1 SOLS makes 5 styles of luxury shoes for men, using job production. SOLS operates in a niche
market. Quality assurance is important. All materials, including leather, are imported. SOLS uses
cost plus pricing. The shoes are sold directly to customers through its website. The Managing
Director said: ‘We can sell our shoes for $100 less a pair than our competitors because we have
no shops.’ Demand is increasing and the Managing Director has to decide whether to change to
batch production.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to SOLS (other than lower prices) of using a website to sell its products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Explain, with reference to SOLS, the difference between quality assurance and quality control.
...........................................................................................................................................
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........................................................................................................................................... [4]
© UCLES 2018 11_0450_11_2018_1.12

3
(d) Identify and explain one advantage and one disadvantage to SOLS of using cost plus pricing.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think SOLS should change its method of production? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2018 11_0450_11_2018_1.12 [Turn over

4
2 AllPlay is a toyshop, set up by Vince in 2012. Each year Vince has met his business objectives
including making a profit in 2017. AllPlay imports all of its products. Vince wants to expand by
opening a second shop so he can sell a wider range of products. The cost of buying the shop is
$20 000. One option for finance is a bank loan. Vince’s bank manager will want to see AllPlay’s
Income statement, and other financial documents.
Table 1: Extract from AllPlay’s Income Statement for the year ending 30 September 2018
$ 000s
Revenue X
Less cost of sales 63
Gross profit 52
Expenses (including rent and marketing) Y
Profit 12
(a) What is meant by ‘business objectives’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to AllPlay of importing its products.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_11_2018_1.12

5
(d) Identify and explain two ways in which the bank might use AllPlay’s financial documents.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a bank loan is the best source of finance for Vince to choose? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_11_2018_1.12 [Turn over

6
3 Filltum is the brand name for a chain of vegetarian restaurants. It has 28 restaurants, 16 of which
are operated by franchisees. The Managing Director is pleased with its fast rate of growth at a time
when many businesses are failing. She said: ‘Having a well-motivated workforce is important to
our success. All new employees are given on-the-job training.’ Filltum plans to have 10 more
restaurants in the next year. The Managing Director has to decide whether to sell additional
franchises or open its own restaurants.
(a) What is meant by ‘brand name’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might fail.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which having a well-motivated workforce can help Filltum
achieve success.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_11_2018_1.12

7
(d) Identify and explain two advantages to Filltum of using on-the-job training.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think selling more franchises is the best way for Filltum to expand? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_11_2018_1.12 [Turn over

8
4 AHP is a multinational company. It makes mobile (cell) phones in Europe in country X. 80% of its
sales are in Europe. Some people are concerned about AHP’s impact on the environment. The
Operations Director said: ‘AHP always tries to ensure it meets all legal controls. Globalisation has
created many opportunities for AHP and its stakeholders. The Operations Director is planning to
relocate its factories to a low-cost country in Asia. Raw materials would need to be transported an
extra 4000kms. Interest rates are likely to increase across Europe.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to AHP of being a multinational company.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which AHP might have an impact on the environment.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_11_2018_1.12

9
(d) Identify and explain two ways in which an increase in interest rates might affect AHP.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think AHP should relocate its factories to a low-cost country in Asia? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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1 hour 30 minutes

11_0450_12_2018_1.13
2
1 M&R Motors has 2 car showrooms. It buys old cars and repairs them before selling them to its
customers. M&R is always trying to increase added value. M&R plans to open another showroom.
The owner said: ‘Finding the right location is important. The new showroom will require a manager
and I need to find someone with the right qualities.’ The job will be advertised in the local newspaper
as shown in Figure 1. The advertisement will cost $5 for one week.
Figure 1: Job advertisement M&R is planning to use for the new manager
CAR SHOWROOM MANAGER REQUIRED

• This successful business is expanding.
• The job involves managing the office and selling cars.
• You will be in charge of three workers who will repair the cars.
• Do you have the qualities we are looking for?
• We offer good pay and working conditions.
For more information apply to M&R Motors
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two qualities that M&R might look for in the new manager.
Quality 1: ..........................................................................................................................
Quality 2: .......................................................................................................................... [2]
(c) Identify and explain two methods of selection M&R could use when choosing the new manager.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_12_2018_1.13

3
(d) Identify and explain two factors that M&R might consider when deciding on a location for the
new showroom.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a newspaper is the best way for M&R to advertise the new job? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_12_2018_1.13 [Turn over

4
2 FTT is a social enterprise. It sells its high quality fair-trade coffee beans to retailers in country P.
Being ethical is important to FTT. It provides local people with information about micro-finance and
skills so they can then start growing beans for FTT to sell for them. FTT wants to start exporting
coffee beans as its market research shows increasing demand for coffee in other countries. FTT’s
managers will have to decide on an appropriate pricing method to use when selling the coffee
beans in other countries.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘micro-finance’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two factors that might affect the accuracy of FTT’s market research.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_12_2018_1.13

5
(d) Identify and explain two ways in which being ethical might help FTT.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend an appropriate pricing method for FTT to use if it starts selling in other countries.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_12_2018_1.13 [Turn over

6
3 TRB is a small business in the secondary sector. TRB assembles computers. All components,
except for the battery and glass for the screen, are imported from other countries. 40% of its products
are exported. Many of its competitors are relocating to low cost countries. TRB’s Operations Director
thinks the opportunities of globalisation may be greater than the threats for TRB. She is looking at
ways to improve efficiency in the factory. One option is to introduce lean production methods.
(a) TRB is in the secondary sector. Identify the other two classifications of business sector activity.
Classification 1: ................................................................................................................
...........................................................................................................................................
Classification 2: ................................................................................................................
........................................................................................................................................... [2]
(b) Identify two ways to measure the size of a business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two methods of lean production that TRB might use.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_12_2018_1.13

7
(d) Identify and explain two possible benefits to TRB of improving efficiency.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_12_2018_1.13 [Turn over

8
(e) Do you think there are more opportunities than threats from globalisation for TRB? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_12_2018_1.13

9
4 Bakin Group (BG) is a limited company. It has 3 holiday parks that offer families holiday
accommodation and activities. BG aims to look after its customers’ needs 24 hours a day. Customers
pay for the holidays when they arrive at the park. Each park has 3 managers and 40 part-time
employees. BG uses a wide range of social media networks for promotion. The Finance Director
is worried about BG’s cash flow position. He cannot decide if an overdraft is the best way for BG
to solve its cash flow problem.
Table 1: Cash flow forecast for period January - March 2019 ($000)
Cash in 120 80 70
Cash out:
Interest 10 10 10
Wages and other

100 90 90
costs
Total cash outflow 110 100 100
Closing balance (30) (50) Y
(a) What is meant by ‘limited company’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the values of X and Y.
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
© UCLES 2018 11_0450_12_2018_1.13 [Turn over

10
(c) Identify and explain two advantages to BG of having part-time employees.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain one advantage and one disadvantage to BG of using social media networks
for promotion.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_12_2018_1.13

11
(e) Do you think an overdraft is the best way for BG to solve its cash flow problem? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
[Total: 80]
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1 hour 30 minutes

11_0450_13_2018_1.11
2
1 KXD is a public limited company. It has 60 shops that sell fashion clothing for 18–25 year olds.
60% of its inventory is imported. KXD has not made a profit for three years. The Managing Director
said: ‘Net cash flow is still positive but KXD has not been able to keep up with an increase in
demand. We have had problems with suppliers not providing the inventory we need on time.’ KXD
plans to fill the vacant post of Operations Director immediately by using either internal recruitment
or external recruitment.
Table 1: Extract from Income Statement for year ending 30 September 2018
$m
Revenue 140
Cost of Sales X
Gross profit 77
Expenses Y
Profit (14)
(a) What is meant by ‘net cash flow’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain two possible problems for KXD of not making a profit.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_13_2018_1.11

3
(d) Identify and explain two ways in which KXD could solve its problems with suppliers.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend whether KXD should use internal recruitment or external recruitment to fill the
vacant post of Operations Director. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_13_2018_1.11 [Turn over

4
2 GGB makes a range of bakery products including pies, cakes and bread. The products are only
sold in its 400 shops, including 60 franchises. Primary market research shows customers’ spending
patterns are changing. GGB has spent 6 months developing new products with a range of healthy
foods including pasta and sushi. High quality will be important. The Marketing Director has to decide
whether Buy One Get One Free is the best method of sales promotion to use for the new products.
(a) What is meant by ‘franchise’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons why customers’ spending patterns change.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why high quality might be important to GGB.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_13_2018_1.11

5
(d) Identify and explain two benefits to GGB of developing new products.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Buy One Get One Free (BOGOF) is the best method of sales promotion for GGB
to use for its new products? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_13_2018_1.11 [Turn over

6
3 Duckett makes cleaning products including washing powder using a range of chemicals. The
Operations Director plans to relocate production to either country X or country Y. He said:
‘Environmental pressures and an increase in legal controls on marketing are the main reasons for
relocating. We are operating at break-even output and we cannot afford to pay our 450 workers
the increased minimum wage of $8 per hour. Many stakeholders will be affected.’
Table 2: Information about two possible locations that Duckett could choose for its new factory
Country X Country Y
Labour costs (per hour) $4 $1
Rent and other fixed costs (per

$3000 $600
month)
Transport costs (per month) $5000 $10 000
(a) What is meant by ‘break-even output’?
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two environmental pressures that Duckett might have to respond to.
Pressure 1: .......................................................................................................................
...........................................................................................................................................
Pressure 2: .......................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which legal controls on marketing might affect Duckett.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_13_2018_1.11

7
(d) Identify and explain two ways in which the local community might be affected by Duckett’s
relocation decision.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend which location Duckett should choose. Justify your answer, using the information
in Table 2.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_13_2018_1.11 [Turn over
8
4 Bill has worked for a large IT company for 30 years. He likes working with computers but he is
finding it difficult to remain motivated. Bill is thinking about starting his own business repairing
computers at people’s houses. Bill thinks there is demand for this service but knows there are risks
of starting up a business. His secondary market research shows existing computer repair businesses
charge high prices and do not offer repairs at home. If Bill starts up the business he will need a
vehicle. This would cost $6000 which Bill plans to pay for using his own savings. Bill would operate
as a sole trader.
(a) What is meant by ‘sole trader’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two methods of secondary market research.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why it would be important for Bill to be motivated if he starts
his own business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_0450_13_2018_1.11

9
(d) Identify and explain two ways (other than financial) Bill could reduce the risk of starting up his
business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that using his own savings is the best source of finance for Bill to use for the
vehicle? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_0450_13_2018_1.11 [Turn over
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© UCLES 2018 11_0450_13_2018_1.11

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1 hour 30 minutes


11_0450_11_2019_1.14
2
1 BFF makes a range of computer screens that it sells to other manufacturers. The Managing Director
has been looking at BFF’s income statement. She is worried about the effects of an increase in the
cost of materials. She said: ‘Changes in technology have improved our production methods. BFF
needs to remain competitive as imports of computer screens are increasing.’ The Managing Director
has to decide whether BFF should increase its prices.
(a) What is meant by ‘income statement’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify the effect of an increase in the cost of materials on each of the following:
Cost of sales: ....................................................................................................................
...........................................................................................................................................
Gross profit: ......................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which BFF’s managers could use information contained in
the income statement.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 11_0450_11_2019_1.14

3
(d) Identify and explain two ways changes in technology used in production could help BFF to
remain competitive.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think BFF should increase its prices? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 11_0450_11_2019_1.14 [Turn over

4
2 WKN sells household goods such as plates and brushes. Last year sales in WKN’s 200 shops
increased but profit fell by 80% to $5m. WKN’s Human Resources Director said: ‘All retailers are
finding this stage of the business cycle challenging. WKN has to reorganise the business. This will
mean redundancy for 1800 shop workers. WKN plans to create 100 new jobs in the marketing
department at head office to help maintain customer loyalty. The company is working with trade
unions to carry out these changes.’ WKN has to decide whether to select the candidates for the
new jobs from the workers being made redundant.
(a) Identify two stages of the business cycle.
Stage 1: ............................................................................................................................
...........................................................................................................................................
Stage 2: ............................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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(c) Identify and explain two ways a trade union could help WKN’s employees.
Way 1: ...............................................................................................................................
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Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two advantages to WKN of maintaining customer loyalty.
Advantage 1: ....................................................................................................................
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Explanation: ......................................................................................................................
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Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think WKN should select all the workers for the new jobs from those about to be made
redundant? Justify your answer.
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3 Keila owns a successful small bakery shop. Keila would like to expand her business. She could
open a café selling cakes and drinks in a popular tourist location. Keila plans to give out free samples
as her main method of promotion. She has prepared some customer and cost information as shown
in Table 1. Keila used primary market research to find out some of the information.
Table 1: Forecast customer and cost information for the new café
Average amount spent per customer $4
Average number of customers per week 325
Variable costs per customer $2
...........................................................................................................................................
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(b) Calculate the forecast revenue per week for the new café.
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Identify and explain two advantages to Keila’s business of using free samples as a method
of promotion.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain one advantage and one disadvantage to Keila’s business of using primary
market research.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Disadvantage: ...................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think Keila should open the new café? Justify your answer using the information in
Table 1.
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4 VXH produces a range of soft drinks made from fruit using batch production. VXH uses specialisation
in its factory. The business has grown quickly over the last two years. VXH has increased the
number of production workers from 40 to 80. This has increased the span of control for each
manager. It has been difficult for VXH to keep workers motivated. The Human Resources Manager
has to decide whether it is better to use job rotation or financial bonuses to improve employee
motivation.
...........................................................................................................................................
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(b) What is meant by ‘uses specialisation’?
...........................................................................................................................................
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(c) Identify and explain two possible reasons why VXH has grown quickly.
Reason 1: .........................................................................................................................
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Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two possible reasons why VXH uses batch production.
Reason 1: .........................................................................................................................
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Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think VXH should use job rotation or financial bonuses to increase employee motivation?
...........................................................................................................................................
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1 hour 30 minutes


11_0450_12_2019_1.15
2
1 GOP is an oil producer based in country X. It is a public corporation. GOP plans to build a 200km
pipeline across the country using retained profits to pay for it. The pipeline will need planning
permission from the Government. Environmental pressure groups are concerned. A spokesperson
for GOP said: ‘GOP’s objectives are different to businesses in the private sector. This pipeline will
create 2000 skilled construction jobs and reduce the need for other businesses to import oil.’
(a) What is meant by ‘public corporation’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two economic objectives of country X’s government.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways a pressure group might try to influence the actions of GOP.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two ways in which the objectives of GOP might be different if it was in the
private sector.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think the Government should allow GOP to build the pipeline? Justify your answer.
...........................................................................................................................................
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2 Samira owns a successful business selling takeaway fried food. She employs 2 part-time workers.
Last year revenue fell for the first time in 10 years. This was because of increased competition from
a well-known franchise. To respond to this, Samira could lower her prices, as shown in Table 1.
Another option is to start a delivery service. Samira plans to do some market research. She has to
decide whether to use secondary research or set up a focus group with some of her customers.
Table 1: Price and variable cost information for Samira’s business
Current price New price
Average price per item $4 $3
Average variable cost per item $2 $2
Forecast average number of

200 300
customers per week
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate Samira’s forecast weekly revenue if she lowered the price of her products.
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why revenue is important for Samira’s business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify and explain two factors Samira should consider before starting a delivery service.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Samira should use secondary research or a focus group to gather market research
information? Justify your answer.
...........................................................................................................................................
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3 LBM is an online fashion clothing retailer. LBM’s target market is 18-35 year olds. Last year revenue
increased by 25% to $600m. The Marketing Director said: ‘All businesses have to satisfy customer
needs. Customer service is important which is why all employees receive induction training. LBM
offers customers a wider range of products than its competitors. Promotion is through social media
networks. Is there any reason to open our own shops?’ LBM plans to add 3500 new styles each
week and will need to arrange finance for the additional inventory.
(a) What is meant by ‘induction training’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Identify two reasons why it is important for LBM to satisfy customer needs.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two problems for LBM of having a wide range of products available to
customers.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain one advantage and one disadvantage to LBM of opening its own shops.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two suitable sources of finance that LBM could use to purchase additional inventory.
Recommend which source of finance LBM should use. Justify your answer.
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4 NBV is a multinational company. It makes building products such as bricks. Last year NBV’s financial
accounts showed capital employed as $144 billion. NBV has operations in 18 countries and a total
workforce of 400 000. NBV experiences some diseconomies of scale. All raw materials are purchased
from the countries it operates in to avoid problems with exchange rates. NBV plans to open a factory
in Country B for the first time. Some people think this decision will only bring drawbacks for other
businesses in country B.
(a) What is meant by ‘exchange rate’?
...........................................................................................................................................
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(b) What is meant by ‘capital employed’?
...........................................................................................................................................
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(c) Identify and explain two ways NBV’s managers could use its financial accounts to help make
decisions.
Way 1: ...............................................................................................................................
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Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two diseconomies of scale that NBV might experience.
Diseconomy of scale 1: ....................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think NBV’s decision to set up a factory will only bring drawbacks to other businesses
in country B? Justify your answer.
...........................................................................................................................................
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1 hour 30 minutes


11_0450_13_2019_1.19
2
1 S&V imports high quality spices and herbs and sells them to local restaurants and shops. S&V
wants to increase added value. It is a business partnership so its owners do not have limited liability.
One of the partners, Serena, is worried that supplies from some countries do not arrive on time or
the wrong items are delivered. She said: ‘S&V cannot have communication barriers with its many
suppliers. In addition, our customers demand up-to-date information about spices and herbs that
are in season.’ Serena has to decide whether e-mail is the best way to communicate with S&V’s
customers.
(a) What is meant by ‘limited liability’?
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........................................................................................................................................... [2]
(b) Identify two ways S&V can increase added value.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible barriers to communication between S&V and its suppliers.
Barrier 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Barrier 2: ...........................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain one effect on S&V of each of the following changes:
Effect of a 10% increase in import tariffs: .........................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Effect of new legal controls over food quality: ..................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think using e-mail is the best way for S&V to inform customers about its products?
...........................................................................................................................................
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© UCLES 2019 11_0450_13_2019_1.19 [Turn over

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2 HBN makes steel rods for the construction industry, using flow production. HBN uses job enrichment
as one way to motivate its 40 employees. HBN has experienced an increase in demand for steel
rods as a result of changes in the business cycle. Businesses, such as HBN, are expected to have
a policy on sustainable development. The Operations Director is considering ways to increase
output of steel rods whilst maintaining high quality. The options are outlined in Table 1.
Table 1: Options for HBN to increase output
Option 1: Extend existing Option 2: Buy another steel

factory business
Cost $750 000 $1 500 000
Additional output 10 000 tonnes per month 26 000 tonnes per month
Other business has different

Will take 6 months to complete
Other information leadership style and organisation
extension
structure to HBN
(a) What is meant by ‘sustainable development’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) What is meant by ‘business cycle’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to HBN of using job enrichment as
one way to motivate its employees.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify and explain two ways in which HBN could maintain high quality.
Way 1: ...............................................................................................................................
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Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
(e) Which option for increasing output do you think HBN should choose? Justify your answer using
the information in Table 1.
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3 RGO is a large airline business. It provides flights to 120 countries using the latest up-to-date
planes. Most of RGO’s customers are people travelling on holiday. RGO sells 80% of its tickets
through its website. It operates in a competitive market so maintaining customer loyalty is important.
One of RGO’s objectives is to increase market share from 8% to 10%. The Managing Director said:
‘One option is to lower ticket prices but to do this we will have to reduce costs.’
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to RGO of being a large business.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible problems to RGO of reducing prices.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two ways (other than lower prices) that RGO could use to increase its
market share.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(e) Explain two ways in which RGO could reduce its costs. Recommend which way RGO should
...........................................................................................................................................
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© UCLES 2019 11_0450_13_2019_1.19 [Turn over

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4 PBG makes cars in country A. The Managing Director has been looking at PBG’s financial accounts.
He is worried about PBG’s liquidity position. An extract from the balance sheet is shown in Table
2. The Managing Director said: ‘New legal controls mean that all cars sold in country A will have
to be electric by 2025. PBG has to find new markets for its existing cars while we develop new
models.’ One option for PBG is to form a joint venture with a car manufacturer in another country.
Table 2: Extract from PBG’s balance sheet
2018 2019
Current assets $m 320 390
Current liabilities $m 256 300
Non-current liabilities $m 480 520
Acid test ratio 0.4 0.3
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate PBG’s current ratio for 2019.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one way each of the following stakeholder groups might use PBG’s financial
accounts.
Trade Payables (Creditors): .............................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Shareholders: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify and explain one advantage and one disadvantage to PBG of forming a joint venture.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the Managing Director is right to be worried about PBG’s liquidity position? Justify
your answer by referring to appropriate ratios.
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™
Cambridge IGCSE

*5364094467*
Paper 1 Short Answer and Data Response October/November 2020

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_0450_11_2020_1.12
2
1 SRB is a bank which provides loans to business customers. SRB plans to make 100 managers’
jobs redundant from its 80 branches. This would remove one level of hierarchy. This is part of its
plan to save $1m in costs over the next 2 years. The Managing Director said: ‘SRB is working with
the trade union about this plan. SRB will make more use of delegation.The bank has to respond
to increased competition from online banks. SRB could either advertise more or develop new
products and services.’
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Define ‘level of hierarchy’.
...........................................................................................................................................
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(c) Outline two advantages of SRB using delegation.
Advantage 1:.....................................................................................................................
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Advantage 2:.....................................................................................................................
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(d) Explain two factors SRB should consider when deciding which managers to make redundant.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that more advertising is a better way for a business to respond to increased
competition than introducing new products and services? Justify your answer.
...........................................................................................................................................
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© UCLES 2020 11_0450_11_2020_1.12 [Turn over

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2 YMG is a private limited company. It is the largest manufacturer of soft drinks in country V. YMG
produces 1 billion litres a year using flow production. The Managing Director wants YMG to expand.
He said: ‘I plan to increase production to 3 billion litres over the next 5 years. This will allow us to
start selling our products in new markets in other countries. I know import quotas and lack of local
knowledge can cause problems but there are ways we can overcome them.’ The Managing Director
also plans to invest $60m in new technology to improve efficiency.
(a) Define ‘flow production’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two methods (other than technology) a business can use to improve efficiency.
Method 1:...........................................................................................................................
...........................................................................................................................................
Method 2:...........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two sources of finance YMG could use for the new technology.
Source of finance 1:...........................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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5
(d) Explain how each of the following problems might affect YMG when entering new markets in
other countries.
Problem caused by lack of local knowledge: ....................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem caused by import quotas: ...................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a joint venture is the best way for a business to enter a new market in another
country? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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6
3 Elton is a sole trader. He sells specialist clothing and equipment for sports, including baseball and
hockey. It is a niche market. Elton started his business 5 years ago and it has remained small. A
wide range of inventory is important. Elton has been looking at the financial performance of his
business. The profit margin for 2018 was 35%. An extract of the accounts is shown in Table 3.1.
Table 3.1
Revenue and cost information for Elton’s business for 2018 and 2019 ($)
2018 2019
Revenue ($) 24 000 25 000
Cost of sales ($) 7 200 Y
Gross profit ($) 16 800 18 000
Expenses ($) 8 400 10 000
Profit ($) X 8 000
(a) Define ‘sole trader’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X : .......................................................................................................................................
Y: ....................................................................................................................................... [2]
(c) State four factors that can influence the amount of inventory a business might hold.
Factor 1:............................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Factor 3:............................................................................................................................
...........................................................................................................................................
Factor 4:............................................................................................................................
........................................................................................................................................... [4]
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7
(d) Explain one advantage and one disadvantage to Elton of operating in a niche market.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Elton should be pleased with the financial performance of his business? Justify
your answer using appropriate ratios.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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8
4 KTF makes building materials, including cement and bricks. Last year KTF had sales of $25bn.
KTF’s objectives have often changed since it was started 60 years ago. The Managing Director
wants KTF to expand. KTF is going to take over one of its main competitors. The newly expanded
business will have combined sales of $40bn. The Managing Director said: ‘Many stakeholder groups
will be affected by this decision.’ She knows there are many external factors that affect business
activity including the business cycle, interest rates and legal controls to protect the environment.
(a) Define ‘business cycle’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might change its objectives.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to KTF of taking over the other business.
Advantage:........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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9
(d) Explain how two external stakeholder groups might be affected by the take over.
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think businesses will be more affected by new legal controls to protect the environment
than an increase in interest rates? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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™
Cambridge IGCSE

*4505551466*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_0450_12_2020_1.15
2
1 Kolo owns a successful hairdressing salon in the city centre. He has 4 part-time employees. The
business has made a profit in each of the last 3 years. Kolo wants to expand by opening another
hairdressing salon to take advantage of the economic boom. He plans to recruit a manager for the
second salon using external recruitment. Kolo has identified 2 possible candidates for the position.
Information about them is shown in Table 1.1.
Table 1.1
Extract from Kolo’s information on the two candidates
Candidate 1 Candidate 2
Experience: 5 years experience 20 years experience
Qualifications: Advanced hairdressing certificate Basic hairdressing certificate
Other information: Never managed a salon Uses autocratic leadership style
Feature 1:..........................................................................................................................
...........................................................................................................................................
Feature 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two stages of the recruitment process.
Stage 1:.............................................................................................................................
...........................................................................................................................................
Stage 2:.............................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible advantages to Kolo of recruiting a manager.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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3
(d) Explain two reasons why choosing the right location for the new salon is important for Kolo.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think experience is the most important factor for a business to consider when recruiting
a new manager? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 11_0450_12_2020_1.15 [Turn over

4
2 DSY is a private limited company. It produces washing machines and cleaning equipment. The
Managing Director wants DSY to expand into a different market. He plans to spend $2bn on
developing electric cars. There is a lot of competition in the electric car market. This market is
growing rapidly. A leading pressure group has identified the environmental problems of non-electric
cars. The Managing Director knows that important decisions about the method of production and
the new car’s brand image still have to be made.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘brand image’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two advantages to DSY of being a private limited company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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5
(d) Explain two factors DSY should consider when deciding on a suitable method of production
for the new product.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think entering a growing market where there is a lot of competition is the best way for
a business to expand? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 11_0450_12_2020_1.15 [Turn over

6
3 Veronique is bored with her work in a large factory. As a creative person, she would like to leave
and start up a flower shop. Veronique has asked about micro-finance and prepared a cash flow
forecast. An extract is shown in Table 3.1. Veronique has also carried out some market research
and found out that the demand for flowers is likely to be high during festivals. She thinks she has
the right characteristics to be a successful entrepreneur.
Table 3.1
Extract from the cash flow forecast for Veronique’s flower shop for the first 3 months ($)
Cash in 500 1 200 2 000
Cash out 1 500 1 400 1 200
Net cash flow (1 000) (200) 800
Opening balance 0 (1 000) (1 200)
Closing balance (1 000) (1 200) (400)
(a) Define ‘micro-finance’.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Veronique now thinks that the cash inflow in month 3 will be $1 500.
Calculate the:
New net cash flow in month 3:..........................................................................................
New closing balance in month 3: ...................................................................................... [2]
(c) State four reasons why a business might have cash flow problems.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Reason 3:..........................................................................................................................
...........................................................................................................................................
Reason 4: .........................................................................................................................
........................................................................................................................................... [4]
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7
(d) Explain one method of primary market research and one method of secondary market research
Veronique could have used.
Method of primary market research:..................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method of secondary market research:............................................................................:
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think being creative is the most important characteristic of being a successful
entrepreneur? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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8
4 Gino owns a fast-food restaurant selling fried chicken and potato fries. He employs 5 full-time chefs
and 12 part-time workers to serve the food. Communication is important and Gino has regular
meetings with his part-time employees to keep them informed about any changes in the menu. It
took 3 years before Gino’s business was able to break-even. He aims to achieve a Return on Capital
Employed (ROCE) of 10%. Gino is always looking for ways to increase the number of customers.
Inflation may be a problem for Gino’s business.
(a) Define ‘break-even’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘Return on Capital Employed’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two problems inflation might cause Gino’s business.
Problem 1:.........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2:.........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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(d) Explain two ways Gino could increase the number of customers.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think having regular meetings is a better way for a business to communicate with
part-time employees than using text messages? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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™
Cambridge IGCSE

*7227189646*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_0450_13_2020_1.14
2
1 Mercy and Ayo are entrepreneurs. They plan to open a shop selling homemade ice cream. Mercy
wants the business to be ethical and only buy high quality organic milk from local farms. Ayo used
sampling to help him carry out some primary market research. An extract of the results from the
300 people in the sample is shown in Table 1.1. Ayo thinks a new business has a better chance
of success if it is located where there is no competition.
Table 1.1
Results from a market research question
What price are you willing to pay for a pot of ice

% of sample
cream?
$0.50 - $1.50 90%
$1.51 to $2.50 55%
$2.51 - $3.50 20%
Over $3.50 5%
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two reasons why sampling is used when carrying out market research.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
© UCLES 2020 11_0450_13_2020_1.14

3
(c) Outline two ways in which being ethical could help Mercy and Ayo’s business.
Way 1:................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Explain two ways in which market research results can help Mercy and Ayo’s business.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 11_0450_13_2020_1.14 [Turn over

4
(e) Do you think a new business has a better chance of success if it locates where there is no
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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2 Lola and Raul are in a business partnership. They make a range of hand-printed products including
t-shirts, bags and posters using job production. Most of Lola and Raul’s customers are tourists.
Lola designs and prints all the products at the back of a small shop. Raul is responsible for sales
and finance. Production is slow and it is difficult for Lola to keep up with demand. Raul wants to
increase output. One way of doing this is to introduce some machinery into the process. Raul also
wants to develop a website.
(a) Define ‘job production’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might want to expand.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways Lola and Raul’s business could use a website.
Way 1:................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 11_0450_13_2020_1.14 [Turn over

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(d) Explain one advantage and one disadvantage to Lola and Raul of being in a business
partnership.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think introducing machinery is a better way for a small business to increase output
than recruiting more employees? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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7
3 CLN is a public limited company. It sells a range of electrical products such as televisions and
computers. The Managing Director has been analysing CLN’s accounts. An extract is shown in
Table 3.1. He said: ‘ We need more finance. Last year CLN made a loss of $250m. I blame increased
competition from e-commerce.’ CLN plans to close 30 of its 120 shops. This decision will affect
many of its stakeholders including the local communities. The number of sales from each shop will
be used to decide which shops to close.
Table 3.1
Extract from Statement of financial position as at 30 September 2020 ($m)
Current assets 60
of which: Inventories 40
(a) Define ‘non-current assets’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the acid test ratio. Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
© UCLES 2020 11_0450_13_2020_1.14 [Turn over

8
(c) State four factors that can affect the source of finance a business might use.
Factor 1:............................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Factor 3:............................................................................................................................
...........................................................................................................................................
Factor 4:............................................................................................................................
........................................................................................................................................... [4]
(d) Explain two ways in which local communities might be affected by CLN’s decision to close
some of its shops.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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(e) Do you think the number of sales from each shop is the best way for a retail business to decide
which shops to close? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2020 11_0450_13_2020_1.14 [Turn over

10
4 Kane started LFP 8 years ago. LFP makes high quality furniture. LFP imports 40% of its materials
including wood. Kane knows there are many external influences on business activity including
employment levels and import quotas. As demand is increasing, LFP needs to recruit 5 additional
production workers. Kane is busy preparing a job advertisement. Having well-motivated employees
is important to LFP. Kane is considering either increasing wages or introducing profit sharing. Kane
also thinks having a clear organisational structure benefits a business.
(a) State two ways quality production can be achieved.
Way 1:................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two benefits to a business of having a clear organisational structure.
Benefit 1:...........................................................................................................................
...........................................................................................................................................
Benefit 2:...........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two factors Kane should consider when preparing the job advertisement.
Factor 1:............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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11
(d) Explain how each of the following external influences might affect LFP:
Lower employment rates:..................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Introduction of import quotas:............................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think increasing wages is a better way for a business to motivate employees than
introducing profit sharing? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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Cambridge IGCSE

*0855414453*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_0450_11_2021_1.9
2
1 After identifying a gap in the soft drinks market, Jerome developed a low sugar drink. He borrowed
$5 000 from family and friends to start-up a business and to provide working capital. Jerome operates
as a sole trader. To promote his product, Jerome handed out free samples in the town centre. In
the first year, Jerome’s business sold 10 000 units. This is 200 units more than his break-even
output. Jerome is considering ways to increase added value.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways that break-even information can help Jerome’s business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_0450_11_2021_1.9

3
(d) Explain how each of the following can help Jerome increase added value:
Change the packaging: .....................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Use cheaper materials: .....................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think giving out free samples is the best method of sales promotion for a business to
use when promoting a new food product? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_0450_11_2021_1.9 [Turn over

4
2 NSN is a multinational company. It makes cars. Over the years, technology has changed production
methods. NSN uses just-in-time inventory control in all its factories. NSN plans to open a new
factory in country Z creating 7 000 jobs. Country Z’s Government has offered an $80m grant to
NSN. A spokesperson for NSN said: ‘Governments should support business activity. There were
also other factors that influenced our decision to build the new factory there including the possible
effects of economic growth.’
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a government might support business activity.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to NSN of using just-in-time inventory control.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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(d) Explain two ways in which an increase in economic growth might affect NSN’s decision to
build a new factory in country Z.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the ways technology has changed production methods benefits all employees?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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........................................................................................................................................... [6]
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3 SBG makes a range of products including specialist paints. It has 6 factories and 700 employees.
All SBG’s employees are encouraged to be involved in decision-making. SBG’s products are
exported to 16 countries using wholesalers as its main channel of distribution. The Managing
Director said: ‘Our objectives are to grow and make a profit.’ He also recognises that all business
activity creates externalities for SBG’s stakeholder groups.
(a) Define ‘externalities’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘stakeholder groups’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why profit might be important to SBG.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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7
(d) Explain two ways SBG can involve its employees in decision-making.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think using wholesalers is the best way for a large business to distribute its products?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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4 BGR is a private limited company. It operates 6 cinemas in different towns. Effective internal
communication is important for BGR. The Finance Director has been analysing BGR’s accounts
and an extract is shown in Table 4.1. BGR plans to open another cinema and will need to recruit
10 new employees. The new cinema will cost $8m. The Finance Director has to decide whether
BGR should issue new shares or use a bank loan to finance the expansion.
Table 4.1
Extract from BGR’s Income statement for year ending 2020 ($000’s)
Revenue X
Cost of sales 180
Gross profit 720
Expenses Y
Profit 400
(a) Define ‘cost of sales’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify four stages of the recruitment process.
Stage 1: ............................................................................................................................
...........................................................................................................................................
Stage 2: ............................................................................................................................
...........................................................................................................................................
Stage 3: ............................................................................................................................
...........................................................................................................................................
Stage 4: ............................................................................................................................
........................................................................................................................................... [4]
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9
(d) Explain two reasons why effective communication might be important to BGR.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think issuing new shares is a better way for a limited company to finance expansion
than using a bank loan? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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Cambridge IGCSE

*0730270950*

1 hour 30 minutes
INSTRUCTIONS
• Answer all questions
INFORMATION
11_0450_12_2021_1.10
2
1 SWB is in the secondary sector. It produces 150 000 wooden bookcases each week using batch
production. SWB sells all its output to one customer. Quality control is important. SWB has 240
employees, of which 100 are part-time workers. SWB’s managers use noticeboards around the
factory and meetings with employees every month to help reduce communication barriers. The
Operations Manager is considering introducing just-in-time inventory control to reduce the amount
of waste.
(a) Define ‘secondary sector’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two factors a business should consider when deciding whether to introduce just-in-time
inventory control.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to SWB of using quality control.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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3
(d) Explain two possible communication barriers that might exist at SWB.
Communication barrier 1: .................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think it is a good idea for a business to have only one customer? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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........................................................................................................................................... [6]
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2 Tom started ALB 5 years ago making trainers (sneakers) out of sustainable materials such as wool.
One of ALB’s objectives is to protect the environment. As part of his research, Tom calculated some
costs which he could use in his break-even analysis. An extract is shown in Figure 2.1. ALB uses
retailers to distribute its products. Tom thinks a successful entrepreneur has to be a good manager.
retailers’ costs 50%
manufacturers’ profit 5%
fixed costs 15%
variable costs 30%
0 10 20 30 40 50 60
percent
Fig. 2.1
(a) Define ‘variable costs’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two limitations of break-even analysis.
Limitation 1: ......................................................................................................................
...........................................................................................................................................
Limitation 2: ......................................................................................................................
........................................................................................................................................... [2]
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5
(c) Outline two possible advantages to ALB of using retailers to distribute its products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Explain one advantage and one disadvantage to ALB of trying to protect the environment.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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(e) Do you think a successful entrepreneur has to be a good manager? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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3 Aurelie is a sole trader. She started her small hotel 1 year ago using government support. Aurelie
knew it would be important to build good customer relationships. Aurelie wants to analyse her
financial statements using ratio analysis. An extract is shown in Table 3.1. She is worried about
how the Government’s plan to introduce a new tourist tax of $1 per tourist per night might affect
her business.
Table 3.1
Extract of Aurelie’s Income statement for 2020 ($)
Revenue 5 600
Cost of sales 1 800
Gross profit X
Expenses 2 400
Profit Y
(a) Identify two ways a government can support new business start-ups.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y : ....................................................................................................................................... [2]
(c) State four financial ratios a business can use.
Financial ratio 1: ...............................................................................................................
...........................................................................................................................................
Financial ratio 2: ...............................................................................................................
...........................................................................................................................................
Financial ratio 3: ...............................................................................................................
...........................................................................................................................................
Financial ratio 4: ...............................................................................................................
........................................................................................................................................... [4]
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(d) Explain two ways that the introduction of a new tourist tax might affect Aurelie’s business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think offering good customer service is the best way for a small business to build
customer relationships? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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4 GCF is a public limited company. It provides a range of computer services to businesses including
designing websites and creating apps. The Human Resources Director use ideas based on Maslow’s
Hierarchy of Needs to help keep GCF’s 250 employees well-motivated. An extract of methods used
is shown in Table 4.1. GCF plans to expand by taking over one of its competitors. This will cost
$50m. To finance the takeover, GCF is considering issuing new shares.
Table 4.1
Extract of methods used at GCF to motivate employees
‘Employee of the month’ award
Organises team building courses
(a) Identify two features of a public limited company.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
........................................................................................................................................... [2]
(b) Identify the level of Maslow’s Hierarchy of Needs each of the following methods belongs to.
‘Employee of the month award’:........................................................................................
Organises team building courses: .................................................................................... [2]
(c) Outline two advantages to GCF of having well-motivated employees.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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(d) Explain one advantage and one disadvantage to GCF of issuing new shares as a source of
finance.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the number of employees is the best way to measure the size of a tertiary sector
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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Cambridge IGCSE

*5239302002*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_0450_13_2021_1.9
2
1 VDN is a private limited company. One of VDN’s objectives is to be ethical. VDN produces office
products including pens and paperclips. All raw materials are imported. The Managing Director
plans to introduce new machinery to help lower average costs. This will require training for VDN’s
380 employees. The Managing Director also wants to introduce Kaizen into the factory.
(a) Define ‘private limited company’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘average cost’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways VDN could be ethical when producing its products.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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3
(d) Explain one advantage and one disadvantage to VDN of introducing Kaizen.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think off-the-job training is the best method for a large business to use when introducing
new machinery? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_0450_13_2021_1.9 [Turn over

4
2 Asmaa used a government grant to set up a small car repair business 4 years ago. Asmaa now
has 3 full-time employees. Keeping her employees well-motivated is important to Asmaa. She
thinks her business has benefited from a low rate of unemployment in the economy. Asmaa is
reviewing her cash-flow forecast. An extract is shown in Table 2.1. She wants to know how the
closure of a competitor and an increase in the minimum wage rate might affect her forecast.
Table 2.1
Extract of Asmaa’s cash-flow forecast ($000’s)
Net cash flow (10) 20 5
(a) Define ’unemployment’.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify one cash inflow and one cash outflow a business might have.
Cash inflow:.......................................................................................................................
Cash outflow:..................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to Asmaa of using a government grant as a
source of finance.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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5
(d) Explain how the following changes might affect Asmaa’s cash-flow forecast.
Closure of a competitor: ...................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Increase in the minimum wage rate: .................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two non-financial methods a small tertiary sector business could use to keep its
employees well-motivated. Justify which method should be chosen.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_0450_13_2021_1.9 [Turn over

6
3 The economy of country C is experiencing economic growth. Based on secondary market research
data, Samuel started a plumbing business. His business installs and repairs bathroom equipment.
Samuel operates as a sole trader. He used all his $500 savings to buy the tools needed. Samuel
had to decide on a suitable pricing method to use. He thinks that providing a good quality service
could help his business to increase added value.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘secondary market research’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline how providing a good quality service could help Samuel’s business increase added
value.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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(d) Explain two possible disadvantages to Samuel of operating as a sole trader business.
Disadvantage 1: ................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage 2: ................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think penetration pricing is a better method for a new business to use than cost-plus
pricing? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_0450_13_2021_1.9 [Turn over

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4 BEF is a large business based in country X. It uses flow production to manufacture a wide range
of products including toothpaste and shampoo. All BEF’s products are currently sold in country X.
BEF knows that having effective methods of internal communication are important. The Operations
Director is analysing production data. An extract is shown in Table 4.1. BEF is considering exporting
its products to country Y.
Table 4.1
Extract of BEF’s production data for one of its products
2019 2020
Average number of production

240 250
workers
Total output per week 300 000 310 000
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate output per worker per week in 2020. Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) State four factors a business should consider when selecting an appropriate method of internal
communication.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Factor 3: ...........................................................................................................................
...........................................................................................................................................
Factor 4: ...........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_0450_13_2021_1.9

9
(d) Explain one reason why the following factors might be important to BEF when deciding whether
to export to country Y.
Import tariffs: .....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Language: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think it is better for a large business to produce a wide range of products than a small
range of products? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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General Certificate of Education Ordinary Level
* 1 5 3 7 4 1 9 3 7 6 *

1 hour 45 minutes

Total
DC (CW/CGW) 41342
2
1 Autobrake is a business that manufactures brake systems for cars. Fig. 1 shows its market For
share in 2005 and 2010. The market for brake systems was worth $70m in 2010. It is likely Examiner’s
to become an increasingly competitive market. Autobrake’s management believe that the Use
company needs to develop a wider range of products if it is to be profitable in the future.
Fig.1: Market shares for brake systems
2010 = Autobrake
year = other companies

2005
0 20 40 60 80 100
% market share
(a) What is meant by an ‘increasingly competitive market’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the value of Autobrake’s sales in 2010.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Autobrake uses flow production in its factories. Identify and explain two benefits of using
flow production.
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
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3
(d) Identify and explain three possible reasons why Autobrake’s market share changed For
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that investing in a wider range of products will mean that the business will
become more profitable in the future? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

4
2 The economy of country A is in recession. To deal with the problems caused by the recession, For
the Government has cut interest rates and reduced taxes. These changes have had a big Examiner’s
impact on businesses in country A. The Government has also introduced laws to protect Use
employees at work. Some people have suggested that the Government should give grants
and subsidies to private sector businesses to help them survive.
(a) What is meant by the term ‘recession’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two ways in which consumers might be affected by a recession.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two consequences of a fall in interest rates on businesses in
country A.
Consequence 1: ...............................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Consequence 2: ...............................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2011 7115/11/M/J/11

5
(d) Identify and explain three ways by which employees can be protected at work by For
Government laws. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that Governments should give financial support to private sector
businesses to survive in a recession? Justify your answer.
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6
3 Sarah set up a business as a sole trader running a nursery for small children too young For
to go to school. The business is successful and has opened a number of new nurseries. Examiner’s
Sarah took on a business partner in 2007. Growth has continued and now the business has Use
10 nurseries in different towns and villages. Sarah is planning to open another nursery and is
looking for a suitable location.
(a) What is meant by the term ‘sole trader’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) A nursery school is classified as a tertiary sector activity. Identify two other examples of
businesses that are also in the tertiary sector.
Example 1: .......................................................................................................................
Example 2: ................................................................................................................... [2]
(c) Identify and explain two advantages to Sarah of having a business partner.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [4]
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7
(d) Identify and explain three factors Sarah should consider when choosing a suitable For
location for a new nursery. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that it would be a good idea for Sarah to continue to expand her business?
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8
4 Trucker is a public limited company that makes products such as tractors and construction For
vehicles. Table 1 gives selected information from its Balance Sheet for the last two years. Examiner’s
Use
Table 1: Trucker’s Balance Sheet as at 30 June
$m
2009 2010

Net Assets 260 305
Financed by:
(a) What is meant by the term ‘shareholders’ funds’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two examples of Trucker’s current assets.
Example 1: .......................................................................................................................
Example 2: ................................................................................................................... [2]
(c) Identify and explain two reasons why a business might have creditors.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 7115/11/M/J/11
9
(d) Identify and explain three possible reasons why Trucker’s net assets increased in 2010. For
Examiner’s
Reason 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Can the success of Trucker’s business be assessed just by analysing its Balance Sheet?
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10
5 Fig. 2 shows the organisational structure of ABC, a business that manufactures toys. For
As the business has grown, the management has found it difficult to maintain good internal Examiner’s
communication and to control activities. ABC always recruits its senior managers from within Use
the company.
Fig. 2: ABC’s organisational structure
(a) What is meant by the term ‘internal communication’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two features of the organisational structure of ABC as shown in Fig. 2.
Feature 1: .........................................................................................................................
Feature 2: ..................................................................................................................... [2]
(c) Identify and explain two reasons why managers may be reluctant to delegate tasks to
employees in their organisation.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [4]
© UCLES 2011 7115/11/M/J/11

11
(d) Identify and explain three advantages to ABC of recruiting senior managers from within For
the business. Examiner’s
Use
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 3: ....................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Recommend two ways in which communication could be improved in a large

organisation. Justify your recommendations.
Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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© UCLES 2011 7115/11/M/J/11

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1 hour 45 minutes

Total
DC (CW/CGW) 41343
2
1 Terfil Enterprises organises special events such as concerts and music festivals. The founder, For
Ceri Terfil, converted the business into a private limited company in 2004. ‘We are in a niche Examiner’s
market’ said Ceri ‘and have built a reputation for efficiency and low prices. I would like the Use
business to continue to grow in the future’.
(a) What is meant by the term ‘niche market’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two objectives that Ceri might have had for his business when he started it.
Objective 1: ......................................................................................................................
..........................................................................................................................................
Objective 2: ......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to Ceri of converting the business to a private
limited company.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [4]
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3
(d) Identify and explain three potential problems to Terfil Enterprises of continuing to grow For
in the future. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) How important are low prices in determining the long term success of Terfil Enterprises?
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4
2 Telefax is a business that manufactures a range of electronic products. Table 1 shows For
selected information from its latest Balance Sheet. Examiner’s
Use
Table 1: Balance Sheet Telefax as at 30 June
$m
2009 2010
Fixed Assets 30 40
Net Assets 30 44
Financed by:
(a) What is meant by the term ‘fixed assets’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two examples of Telefax’s current liabilities.
Example 1: .......................................................................................................................
Example 2: ................................................................................................................... [2]
(c) Identify and explain two reasons why most businesses have debtors.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [4]
© UCLES 2011 7115/12/M/J/11

5
(d) Identify and explain three reasons why Telefax’s bank manager might want to see the For
accounts of the business. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Do you think that the financial position of Telefax has improved in 2010? Justify your
answer.
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6
3 Kemptown Fried Chicken is a chain of fast food restaurants. The business is unsuccessful For
because it is badly managed. There is no organisational structure. Job tasks and roles are Examiner’s
unclear. The workers are demotivated and low paid. Communication in the business is poor Use
and meetings are rarely held because the management think they are ‘a non-productive use
of time’.
(a) What is meant by the term ‘organisational structure’?
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by ‘communication in the business is poor’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages of delegating tasks in an organisation.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2011 7115/12/M/J/11

7
(d) Identify and explain three reasons why meetings between managers and workers can For
benefit the business. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) How effective is money in motivating workers? Justify your answer.
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8
4 Delwar makes car tyres. The business is located in country Z. At present, all its sales are to For
customers in country Z. Delwar is the market leader in this country. Fig. 1 gives data regarding Examiner’s
its market share. The total value of car tyre sales in country Z in 2010 was $50m. This market Use
is no longer growing. The Managing Director of Delwar thinks that exporting tyres is the way
forward. There will be both costs and benefits of exporting tyres.
Fig. 1: Bar chart showing market share
% market share
100
80
60
40 = other companies
20 = Delwar
2005 2010
year
(a) What is meant by the term ‘market leader’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) Calculate the value of Delwar’s sales in 2010.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible reasons why the market for car tyres in country Z is no
longer growing.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [4]
© UCLES 2011 7115/12/M/J/11

9
(d) Identify and explain three methods Delwar could use to increase its market share in For
country Z. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Do you think Delwar’s profits would increase if the business were to export its tyres?
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10
5 Extracto is a multinational mining business. It has recently found mineral deposits in For
country X. The Managing Director hopes that the deposits found are large enough for them Examiner’s
to make a good profit. Some pressure groups in country X think that Extracto has only Use
considered the financial benefits of its plans and has ignored the social costs.
(a) What is meant by a ‘financial benefit’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) Identify two examples of social costs that extraction of minerals might create.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which pressure groups could influence Extracto’s
decisions.
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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11
(d) Identify and explain three factors that Extracto should consider before deciding whether For
to begin mining in country X. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Governments often aim to attract multinational companies into their countries. Do you
think that they should do this? Justify your answer.
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1 hour 45 minutes

Total
DC (SLM) 58582/1
2
1 IRKAM is a company that produces high quality doors for hotels and offices. The company For
currently uses job production. The Managing Director, Abdul, believes that quality control Examiner’s
is important. He is looking for ways to increase productivity. All workers receive on-the-job Use
training. Abdul is thinking of including off-the-job training as well.
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(c) Identify and explain one advantage and one disadvantage of off-the-job training for
IRKAM.
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Disadvantage: ..................................................................................................................
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Explanation: .....................................................................................................................
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3
(d) Identify and explain two reasons why quality control might be important to IRKAM. For
Examiner’s
Reason 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Over the past three years there has been a large increase in demand for IRKAM’s doors.
Do you think job production is still the best method of production for IRKAM? Justify
your answer.
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4
2 Sunil is a sole trader. He likes owning a small business. His shop sells low price raincoats. For
Sales vary throughout the year. The market for raincoats is competitive, but as Sunil makes Examiner’s
a profit he doesn’t think competition is a problem for his business. In order to protect Use
consumers, the Government of Sunil’s country has recently introduced new laws to protect
consumers.
(a) What is meant by ‘profit’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two factors which could affect demand for Sunil’s products.
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why profit is important to small businesses like Sunil’s.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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© UCLES 2012 7115/11/M/J/12

5
(d) Identify and explain one way in which consumer protection laws might affect Sunil’s For
business and one way consumer protection laws might affect his customers. Examiner’s
Use
Way consumer laws affect Sunil’s business: ....................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
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..........................................................................................................................................
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Way consumer laws affect Sunil’s customers: .................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think the advantages of owning a small business are greater than the
disadvantages for Sunil? Justify your answer.
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6
3 The Government of country H is concerned about the effect of business activity on the For
environment. It wants to encourage sustainable development. To do this, it is planning to Examiner’s
introduce laws to encourage environmentally-friendly production methods. A number of Use
businesses will be affected by these new laws.
The Government of country H has collected the data shown in Table 1. Gross Domestic
Product (GDP) measures the value of the total output produced in a country in one year. The
GDP of country H has risen from $625m in 2000 to $825m in 2011.
Table 1: Percentage of GDP by different sectors
% of GDP
2000 2011
Primary sector 35 15
Secondary sector 40 25
Tertiary sector 25 60
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) What is meant by ‘sustainable development’?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two changes between 2000 and 2011 that are shown in Table 1.
Change 1: ........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Change 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/11/M/J/12
7
(d) Identify and explain three ways a Government could encourage more businesses to set For
up in its country. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that all businesses will be affected by the introduction of the new laws to
encourage environmentally-friendly production methods? Justify your answer.
..........................................................................................................................................
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8
4 Rapid Call is a private limited company. It manufactures a range of cell (mobile) phones. For
The demand for these is increasing. Its products have several special features that are Examiner’s
not available from other phone manufacturers. It sells its products directly to retail shops. Use
Rapid Call uses competitive pricing for all products. The Finance Director has been looking
at the accounts. A summary is shown in Table 2. In 2011 the gross profit margin was 40%.
Table 2: Profit/Loss Account for Rapid Call for year ending 30 April 2012 ($000s)
Sales 450
Cost of Sales 300
Gross Profit 150
Overheads 95
Net Profit 55
(a) What is meant by ‘private limited company’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Calculate the gross profit margin for the year ending 30 April 2012.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways in which Rapid Call’s Finance Director could use the
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/11/M/J/12

9
(d) The Marketing Director is thinking about changing the channel of distribution. Identify For
and explain three factors that Rapid Call should consider when choosing a suitable Examiner’s
channel of distribution. Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) How important is increased competition in influencing the marketing strategy of

Rapid Call? Justify your answer.
..........................................................................................................................................
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10
5 Favell is a woodworker. He is planning to set up his own woodworking business. He plans For
to use marketing to help his business become established in the local area. Favell thinks Examiner’s
cash flow will be a problem because his business will have a lot of cash outflows. A friend Use
has suggested he prepares a cash flow forecast.
(a) What is meant by ‘marketing’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two possible cash outflows for Favell’s business.
Cash outflow 1: .................................................................................................................
Cash outflow 2: ............................................................................................................ [2]
(c) Identify and explain two benefits for any business of preparing a cash flow forecast.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/11/M/J/12

11
(d) Favell is looking at various methods of promotion for his business. Identify and explain For
three suitable methods of promotion that Favell could use to attract customers. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Favell needs $10 000 to buy a motor vehicle so that he can carry all his equipment. He is
planning to ask the bank for an overdraft. Do you think this is the most suitable source of
finance for him to choose? Justify your answer.
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1 hour 45 minutes

Total
DC (NF) 58370
2
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..................................................................................................................................... [2]
Objective 1: ......................................................................................................................
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Objective 2: ......................................................................................................................
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Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2012 7115/12/M/J/12

3
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
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Explanation: .....................................................................................................................
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4
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Way 1: ..............................................................................................................................
Way 2: ......................................................................................................................... [2]
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
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5
Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Advantage 3: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
answer.
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6
2011 2012
Sales 400 520
Net Profit 40 75
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
..........................................................................................................................................
..................................................................................................................................... [2]
of HTB.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/12/M/J/12

7
Examiner’s
Factor 1: ........................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
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Explanation: .....................................................................................................................
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8
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control.
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/12/M/J/12

9
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
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Explanation: .....................................................................................................................
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10
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Feature 1: .........................................................................................................................
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Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
Place 1: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Place 2: ............................................................................................................................
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Explanation: .....................................................................................................................
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11
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
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Explanation: .....................................................................................................................
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1 hour 45 minutes

DC (JF) 72496/1
2
1 Kew Construction is a public limited company. It specialises in building large houses. Each For
house costs $30 000 to build and the company adds 40% to total cost to calculate the selling Examiner’s
price. Last year sales fell by $90m and dividends were reduced. The Human Resources Use
Director is worried: ‘If sales do not improve, I will need to make some workers redundant.
How can I decide which workers to make redundant?’
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the selling price of one house.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two disadvantages to a business of being a public limited company.
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
...................................................................................................................................... [4]
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3
(d) Identify and explain three methods that Kew Construction could use to improve its level For
of sales. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) What do you think are the most important factors for the Human Resources Director to
consider when selecting which workers to make redundant? Justify your answer.
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4
2 Gayle’s Soaps is a business which manufactures health and beauty products. Its market For
share has remained constant at 15% despite new businesses entering this market. The Examiner’s
business uses market segmentation. Most of its customers are women. The Marketing Use
manager believes the company could increase its profits if it increases the price of each of its
most popular products.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two ways (other than gender) that Gayle’s Soaps could segment its market.
Way 1: ..............................................................................................................................
Way 2: ........................................................................................................................... [2]
(c) Identify and explain two advantages of market segmentation for Gayle’s Soaps.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
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Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
...................................................................................................................................... [4]
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5
(d) Identify and explain three problems that a business might have when trying to enter a For
new market. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that if Gayle’s Soaps decides to increase prices then this will lead to higher
..........................................................................................................................................
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6
3 Sharma Machine manufactures motorcycles. The company is product orientated. Sharma For
Machine holds a lot of stock. The owner, Ishant, wants to increase productivity. Also the Examiner’s
company plans to open an additional factory to satisfy increased demand. ‘Expansion should Use
mean economies of scale’ said Ishant. ‘The right location for the new factory is going to be
important if the business is to remain competitive.’
(a) What is meant by ‘product orientated’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two possible economies of scale the business might benefit from if it expands.
Economy of scale 1: .........................................................................................................
Economy of scale 2: ..................................................................................................... [2]
(c) Identify and explain two possible problems for Sharma Machine of holding a lot of stock.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2013 7115/11/M/J/13

7
(d) Identify and explain three methods that Ishant could use to increase productivity. For
Examiner’s
Method 1: ......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) How important is the right location for the new factory in helping Sharma Machine to
remain competitive? Justify your answer.
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8
4 Luxury Destinations owns three hotels in country X. The business spends a lot of money For
on staff training. The Finance Director is pleased with the financial position of the business. Examiner’s
‘However, the appreciation of our country’s currency and the Government’s plan to increase Use
taxes might cause problems to our business in the future’ he said.
Table 1: Luxury Destinations financial information ($000s)
2011 2012
Net profit 30 60

(a) What is meant by ‘appreciation of our country’s currency’?
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two problems that an increase in taxes could cause for Luxury
Destinations.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2013 7115/11/M/J/13

9
(d) Identify and explain three benefits for Luxury Destinations of training its employees. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think the Finance Director is right to be pleased with the financial position of the
..........................................................................................................................................
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10
5 AM Designs is a private sector business. It makes dresses. It is a successful business For

because it adds value. Amira is directly responsible for a team of 12 people. ‘I want to keep a Examiner’s
short chain of command but I do need a manager to help me. I must find someone with the Use
right qualities. All of my team are highly motivated and someone with the wrong management
style might cause problems.’
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two ways that a business could increase added value.
Way 1: ...............................................................................................................................
..........................................................................................................................................
Way 2: ...............................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages of a short chain of command for Amira.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
...................................................................................................................................... [4]
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11
(d) Identify and explain three qualities that Amira might look for in a manager. For
Examiner’s
Quality 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Quality 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Quality 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the management style of the new manager might cause problems?
..........................................................................................................................................
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© UCLES 2013 7115/11/M/J/13

* 2 6 6 9 8 6 4 2 7 2 *

1 hour 45 minutes

DC (JF) 72497/1
2
1 Brakker is a public limited company which specialises in building large boats. Each boat For
costs $4m to build and the company adds 30% to the total cost to calculate the selling price. Examiner’s
‘Last year profits fell – but this happens in a recession’ said the Finance Director. ‘Yes, I am Use
worried. If we cannot get more orders we will have to make some of our skilled workers
redundant.’ All Brakker workers are members of a trade union.
(a) What is meant by a ‘recession’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the selling price of a boat.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to a business of being a public limited company.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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3
(d) Identify and explain three benefits to Brakker’s workers of being members of a trade For
union. Examiner’s
Use
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think it is a good idea for Brakker to make some of its skilled workers redundant
during a recession? Justify your answer.
..........................................................................................................................................
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...................................................................................................................................... [6]

4
2 B&G manufactures a popular hair shampoo called Slick. The Managing Director thinks that For
Slick is near the end of its product life cycle. He believes it would be better to use extension Examiner’s
strategies rather than develop a new product. The Operations Director thinks quality control Use
can help the business comply with new consumer protection laws.
(a) What is meant by ‘quality control’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
Stage 1: ............................................................................................................................
Stage 2: ........................................................................................................................ [2]
(c) Identify and explain two ways in which consumer protection laws could benefit B&G’s
customers.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2013 7115/12/M/J/13

5
(d) Identify and explain three possible problems for B&G when developing a new product. For
Examiner’s
Problem 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Explain two possible extension strategies that B&G could use for Slick. Recommend
which strategy the company should use. Justify your answer.
Strategy 1: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Strategy 2: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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Recommendation: ............................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [6]

6
3 Emir is the Production manager at a large food production factory. He wants to lower For
average cost to help the business remain competitive. All workers are paid using time rate. Examiner’s
Emir believes that good internal communication is important. The company has decided to Use
stop importing raw materials as this causes a lot of problems. Emir must choose a suitable
method of communication to tell the overseas suppliers of his decision.
(a) What is meant by ‘internal communication’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two suitable methods of communication Emir could use to tell the overseas
suppliers of his decision to stop importing raw materials.
Method 1: .........................................................................................................................
Method 2: ..................................................................................................................... [2]
(c) Identify and explain two payment methods for workers that this business could use
(other than time rate).
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2013 7115/12/M/J/13

7
(d) Identify and explain two possible problems of importing raw materials for this food For
production business. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Explain two ways in which the Production manager could reduce average cost.
Recommend which way should be used. Justify your answer.
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

8
4 Belshire Books owns a number of shops. The Finance manager is worried about the financial For
position of the company. An extract of the accounts is shown in Table 1. Belshire Books is Examiner’s
facing increased competition from online booksellers selling through the Internet. Use
Table 1: Extract from Belshire Books accounts ($000s)
2011 2012
Net profit 50 30
(a) What is meant by ‘net profit’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which Belshire Books could improve profitability.
Way 1: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2013 7115/12/M/J/13

9
(d) Identify and explain two problems that competition from online (Internet) booksellers For
could cause for Belshire Books. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the Finance manager is right to be worried about the financial position
of the business? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

10
5 ANZ is a large multinational company which manufactures aeroplanes. Growth is an For

important objective for the company. ANZ wants to start producing in country P for the first Examiner’s
time. The new factory will operate for 24 hours a day. A pressure group in country P believes Use
that all business activity is bad for the environment. It wants the Government to do more to
control business activity.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two measures a Government could use to control business activity.
Measure 1: .......................................................................................................................
Measure 2: .................................................................................................................... [2]
(c) Identify and explain two reasons why objectives are important to businesses such as
ANZ.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
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11
(d) Identify and explain three advantages for country P of ANZ’s decision to open a new For
Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 3: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that all business activity is bad for the environment? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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© UCLES 2013 7115/12/M/J/13

Cambridge Ordinary Level
* 4 6 5 0 6 9 8 9 0 5 *

1 hour 45 minutes

DC (SJF/SW) 91241
2
1 Anouk is a sole trader. She designs and makes jewellery at home, using hired (rented) equipment.
Anouk enjoys selling the jewellery at local markets. Last year her sales revenue increased by $500
to $3000. She plans to use $50 for a marketing budget. Anouk would like to do some primary
market research when she has time. Anouk thinks she should have a business partner.
(a) What is meant by a ‘marketing budget’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two methods of primary market research that Anouk could use.
Method 1: ..................................................................................................................................
Method 2: ..............................................................................................................................[2]
(c) Identify and explain two possible advantages for Anouk of hiring equipment.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/11/M/J/14

3
(d) Identify and explain two disadvantages to Anouk of having a business partner.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Anouk could use either leaflets or local newspaper advertising as methods of promoting her
jewellery. Recommend which method you think Anouk should use. Justify your answer.
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4
2 Keypeople is a recruitment agency which only operates in one small town in country Z. Its owner,
Rachel, and her two employees know that good customer service is important. Rachel would like to
expand her business. Keypeople offers a variety of human resource services to other businesses,
such as recruiting employees and preparing employment contracts. Rachel has been asked by a
local manufacturing business to recruit a senior manager.
(a) Identify two examples of tertiary sector business activity in your country, other than a
recruitment agency.
Example 1: ................................................................................................................................
Example 2: ............................................................................................................................[2]
(b) Identify two reasons why good customer service is important for Keypeople.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two reasons why employment contracts are used by businesses.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Reason 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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5
(d) Identify and explain two stages in the recruitment process of the manager’s job for the
manufacturing business.
Stage 1: ....................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Stage 2: ....................................................................................................................................
Explanation: ..............................................................................................................................
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...............................................................................................................................................[6]
(e) Do you think Rachel should expand Keypeople? Justify your answer.
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6
3 HPT makes frozen food products. The Finance Director wants to improve HPT’s cash flow position.
Table 1 is an incomplete cash flow forecast for the next 3 months. The Finance Director thinks HPT
should not use expensive packaging. He is also worried that new Government health & safety laws
will not benefit the company and will only add to its costs.

Opening balance (50 000) (30 000) (40 000)
Cash inflows 200 000 180 000 200 000
Cash outflows:
Wages 60 000 60 000 60 000
Packaging 20 000 20 000 20 000
Raw materials 45 000 55 000 45 000
Fixed costs 55 000 55 000 55 000
Total cash X 190 000 180 000
outflows
Net cash flow 20 000 Y 20 000
Closing balance (30 000) (40 000) (20 000)
(a) Identify two fixed costs that HPT might have.
Fixed cost 1: ..............................................................................................................................
Fixed cost 2: ..........................................................................................................................[2]
Month 1 total cash outflows (X): ................................................................................................
...................................................................................................................................................
Month 2 net cash flow (Y): ........................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two benefits to HPT of having a cash flow forecast. You should refer to
Table 1 in your answer.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/11/M/J/14
7
(d) Identity and explain two reasons why packaging might be important for HPT.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The Finance Director is worried that new Government health & safety laws will not benefit the
company and will only add to its costs. Do you agree? Justify your answer.
...................................................................................................................................................
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8
4 The economy of country U is in recession. The Government has cut interest rates to attract
businesses to set up in country U. JWR is a large multinational energy company. JWR may decide
to open a power station in country U. The Government thinks that opening a new power station will
create many external benefits. Some pressure groups do not want companies like JWR operating
in their country.
(a) Identify two features of a recession.
Feature 1: ..................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two effects of a cut in interest rates on businesses like JWR.
Effect 1: .....................................................................................................................................
...................................................................................................................................................
Effect 2: .....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two actions that pressure groups could use to influence JWR’s decision.
Action 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Action 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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9
(d) Identify and explain two external benefits as a result of opening a new power station in
country U.
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that the Government of country U should try to attract multinational businesses?
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10
5 Callow is a large retail business based in country X. ‘Our employees are an important stakeholder’,
said the Managing Director. ‘To make sure we stay profitable we need to motivate them.’ Callow
trains all of its shop employees by using off the job training.
Fig. 1: Callow Organisation Structure
Managing Director
HR Director Finance Director Operations Director Marketing Director
West Region South Region North Region East Region

Shop Managers × 6
Department Managers × 4
Supervisors × 2
Sales Assistants × 8
(a) Identify two stakeholder groups, other than employees.
(b) Identify two functions of management that each shop manager will have to perform.
Function 1: ................................................................................................................................
Function 2: ............................................................................................................................[2]
(c) Identify and explain two features of Callow’s organisational structure.
Feature 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
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...................................................................................................................................................
Feature 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
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...............................................................................................................................................[4]
© UCLES 2014 7115/11/M/J/14
11
(d) Identify and explain two possible methods that Callow could use to improve the motivation of
its employees.
Method 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think it is a good idea for Callow to use off the job training for all its shop employees?
...................................................................................................................................................
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© UCLES 2014 7115/11/M/J/14

12
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© UCLES 2014 7115/11/M/J/14

* 1 5 3 2 9 9 3 3 9 9 *

1 hour 45 minutes

DC (NH/JG) 91237
2
1 LEK owns 80 electrical shops. It sells products such as cell (mobile) phones and televisions. The
Marketing Director believes offering customers a choice of products helps LEK to be competitive.
LEK must use suitable ways to communicate with its customers. LEK’s directors are planning a
takeover of a competitor. This competitor owns 40 shops and operates in the same 4 regions as
LEK.
Fig. 1: LEK organisational chart
Managing Director
HR Finance Director Operations Director Marketing Director

Director
Region 1 Region 2 Region 3 Region 4

Shop Managers Shop Managers Shop Managers Shop Managers

×20 ×20 ×20 ×20
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two factors (other than offering choice and having good communication) which could
help make LEK more competitive.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two benefits to LEK of having an organisational chart.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2014 7115/12/M/J/14
3
(d) Identify and explain two suitable methods of communication that LEK could use to
communicate with its customers.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
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Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that the takeover of the competitor would benefit LEK? Justify your answer.
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4
2 Cutter is a family owned private limited company. It manufactures a luxury brand of coats. In
2013 sales revenue increased by $3m and retained profits also increased. ‘The marketing mix is
working’ said the Marketing Director. Cutter’s Operations Director thinks that batch production is
still the right method of production to use, but he cannot decide whether on the job or off the job
training is better for the business.
(a) What is meant by ‘retained profit’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible advantages to Cutter of being a private limited company.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible advantages to Cutter of using batch production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/12/M/J/14

5
(d) Identify and explain two possible elements of a suitable marketing mix for Cutter’s products.
Element 1: .................................................................................................................................
Explanation: ..............................................................................................................................
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Element 2: .................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think it is better for Cutter to use on the job or off the job training? Justify your answer.
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6
3 SENG manufactures cameras. Last year its market share increased by 2% to 18%. Production is
capital intensive. This allows SENG to use lean production methods such as just-in-time. Cameras
have a short product life cycle. SENG spends $200m each year on extension strategies. The
Marketing manager thinks that an increase in market share will lead to higher profits.
(a) What is meant by ‘capital intensive?’
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why cameras might have a short product life cycle.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible advantages to SENG of using lean production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/12/M/J/14

7
(d) Identify and explain two possible extension strategies that SENG could use for one of its
types of camera.
Strategy 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Strategy 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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...............................................................................................................................................[6]
(e) Do you think that an increase in market share will always lead to higher profits for SENG?
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8
4 The Government of country B plans to build a new airport. A Government spokesperson said:
‘There will be external costs, but I think there will be more benefits for the local community. We
have to support businesses such as airlines in the private sector’. RU Air is one of the world’s most
profitable airlines. RU has announced plans on its website that it will operate flights to and from
country B in the future. RU is a public limited company.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two ways the Government might support RU Air and other private sector business
activity (other than by building a new airport).
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two benefits to RU Air of high profits.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/12/M/J/14

9
(d) Identify and explain two benefits for RU Air of having a website.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you agree that there are likely to be more advantages for the local community from the
new airport than disadvantages? Justify your answer.
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10
5 Anyshade manufactures a range of paints. It uses flow production. The Finance manager has
produced a cash flow forecast as the business wants to arrange an overdraft with its bank.
The Finance manager believes that reducing prices is the best way to increase sales revenue.
Anyshade’s paints are well known for quality.

Opening balance (9 000) 6 000 Y
Cash inflows:
Cash sales 90 000 30 000 50 000
Cash from debtors 50 000 80 000 70 000
Total cash inflows 140 000 110 000 120 000
Cash outflows:
Fixed costs 70 000 70 000 70 000
Wages 20 000 18 000 19 000
Raw materials 35 000 30 000 30 000
Total cash outflows 125 000 118 000 119 000
Net cash flow X (8 000) 1 000
Closing balance 6 000 (2 000) (1 000)
...................................................................................................................................................
...............................................................................................................................................[2]
July net cash flow (X): ...............................................................................................................
...................................................................................................................................................
September opening balance (Y): ..............................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to Anyshade of using flow production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/12/M/J/14
11
(d) Identify and explain two possible reasons why Anyshade has cash flow problems.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Anyshade’s Finance manager believes that reducing prices is the best way to increase sales
revenue. Do you agree? Justify your answer.
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© UCLES 2014 7115/12/M/J/14

12
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© UCLES 2014 7115/12/M/J/14

* 1 0 3 2 9 7 4 5 3 4 *

1 hour 30 minutes

DC (NH/AR) 107283
2
1 Gomez is the manager of a small computer repair business. Table 1 shows some costs and prices
for his business. As it is a competitive market, Gomez knows it is important to maintain customer
loyalty and revenue. Gomez knows that a lower break-even point would help improve profits. He
thinks the best way to lower the break-even point is to raise prices.
Table 1: Cost and price information

Average number of customers per month 140
Monthly fixed costs $1000
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(c) Using the information in Table 1, draw a break-even chart for Gomez’s business. [4]
5000
4500
4000
3500
3000
costs and revenue
($ per month) 2500
2000
1500
1000
500
0
0 25 50 75 100 125 150
number of customers per month
© UCLES 2015 7115/11/M/J/15

3
(d) Identify and explain two methods that Gomez could use to maintain customer loyalty.
Method 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Method 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Gomez thinks the best way to lower the break-even point is to raise prices. Do you agree?
...................................................................................................................................................
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4
2 Country S is enjoying an economic boom. During this time, businesses have increased their profits
and unemployment has fallen. The only problem is inflation. All Active is a private limited company.
It owns 20 sport and fitness clubs in country S. The Managing Director said: ‘This is a good time
to expand by opening 5 more clubs. Finding the right locations is important. We will need to recruit
more employees.’ He cannot decide whether it would be an advantage for All Active to become a
public limited company.
(a) Identify two stages of the recruitment process.
Stage 1: ....................................................................................................................................
Stage 2: ............................................................................................................................... [2]
(b) What is meant by an ‘economic boom’?
...................................................................................................................................................
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.............................................................................................................................................. [2]
(c) Explain how falling unemployment might affect All Active.
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.............................................................................................................................................. [4]
© UCLES 2015 7115/11/M/J/15

5
(d) Identify and explain two factors that All Active should consider when deciding on the location
of the new clubs.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Consider the advantages and disadvantages for All Active of being converted to a public
limited company. Do you think All Active should become a public limited company? Justify
your answer.
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6
3 Si and Ramon are friends. They want to set up a photography business. They would take pictures
at weddings, birthdays and other special events. The business will be a partnership. Based on their
primary market research, Si believes there is enough demand. Ramon has produced a business
plan which shows they need $8000 for a shop and $4000 for equipment. They plan to spend $500
on promotion, but cannot agree on the best method to use.
(a) What is meant by a ‘partnership’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two methods of primary market research that Si and Ramon might have used.
Method 1: ..................................................................................................................................
Method 2: ............................................................................................................................. [2]
(c) Identify and explain two possible sources of finance that they could use to obtain the
equipment.
Source 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Source 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 7115/11/M/J/15

7
(d) Identify and explain two advantages to Si and Ramon of having a business plan.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Consider two methods of promotion that would be suitable for Si and Ramon to use. Which of
these two methods would be the most appropriate? Justify your answer.
...................................................................................................................................................
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8
4 Javid is a company that manufactures a range of luxury chocolates using batch production. Over
the past year, profit has fallen due to increased competition. In order to cut costs, the Finance
Director has suggested the company introduces new technology into the production process. The
Human Resources Director is not sure that workers would benefit from the introduction of new
technology.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two advantages (other than cutting costs) to the company of using new technology.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Advantage 2: ............................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two reasons why the quality of chocolates might be important to this
company.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
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9
(d) Identify and explain two problems that a fall in profit might cause for the company.
Problem 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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Problem 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that the introduction of new technology would benefit Javid’s workers? Justify
your answer.
...................................................................................................................................................
...................................................................................................................................................
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* 7 7 9 8 2 0 8 5 1 4 *

1 hour 30 minutes

DC (KN/AR) 107285
2
1 PJK makes a range of luxury sports watches. Each watch is handmade by skilled workers. Quality
assurance is important. The Operations Director has been looking at costs and prices as he
wants to do a break-even analysis. This data is shown in Table 1. He is planning to invest in new
technology to automate parts of the production process. The Operations Director thinks this is the
best way to improve profitability.
Table 1: Costs and revenue ($)
Price per watch $100

Variable cost per watch $50
Annual sales 6000
Annual fixed costs $200 000
(a) What is meant by ‘quality assurance’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two ways in which break-even analysis might be helpful to PJK.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
.............................................................................................................................................. [2]
© UCLES 2015 7115/12/M/J/15

3
(c) Using the information in Table 1, draw a break-even chart for PJK on Figure 1. [4]
Figure 1
600 000
550 000
500 000
450 000
400 000
350 000
costs and revenue
($ per year) 300 000
250 000
200 000
150 000
100 000
50 000
0 1000 2000 3000 4000 5000 6000 7000 8000

output (units)

4
(d) Identify and explain two advantages to PJK of having skilled workers.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that investing in new technology is the best way to improve profitability at PJK?
...................................................................................................................................................
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6
2 Alkin is a multinational company. It manufactures breakfast food products including many leading
brands of cereal. Alkin plans to start selling in country Z, which is a fast-growing market. Alkin
plans to form a joint venture with a local business, based in country Z. ‘Effective communication
will be important to our success but I think there are many advantages in expanding this way’ said
Alkin’s Managing Director. The Government of country Z is worried about the effect of multinational
companies like Alkin on consumers.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) What is meant by a ‘brand’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two reasons why effective communication might be important for Alkin.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
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7
(d) Identify and explain two advantages to Alkin of using a joint venture to expand into country Z.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2 ..............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that the Government in country Z is right to be worried about the effect of
multinational companies such as Alkin on consumers? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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.............................................................................................................................................. [6]

8
3 Mabel wants to set up her own hairdressing business. She will need to build good customer
relationships. She has done some secondary market research to find out possible demand and
what methods of promotion to use. She has decided to buy her inventory (stock) from a wholesaler.
Mabel is now looking for the right location for her business. She thinks that location will be more
important than price charged to the success of her business.
(a) Identify two ways that a business could build good customer relationships.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
.............................................................................................................................................. [2]
(b) What is meant by ‘secondary market research’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two methods of promotion (other than promotional pricing) that Mabel
might use.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 7115/12/M/J/15

9
(d) Identify and explain two possible disadvantages to Mabel of buying her inventory from a
wholesaler.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that the right location is more important than the prices she charges to the
success of Mabel’s business? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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.............................................................................................................................................. [6]

10
4 A2Z is a small but successful airline company in country B, providing flights for business people.
The management of A2Z wants the business to expand. It will have to buy more aeroplanes and
recruit more airline pilots. The Human Resources manager has produced a job description for
the pilots. She is now ready to advertise for the new pilots. She believes the best way for A2Z to
motivate its pilots is to use financial rewards.
(a) Identify two possible reasons why A2Z might want to expand.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two factors that A2Z should consider when choosing a source of finance to buy more
aeroplanes.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two advantages to A2Z of producing a job description.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
© UCLES 2015 7115/12/M/J/15

11
(d) Identify and explain two suitable ways A2Z could use to advertise the new jobs.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that using financial rewards is the best way for A2Z to motivate its pilots? Justify
your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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*9212804226*

1 hour 30 minutes

DO NOT WRITE IN ANY BARCODES

06_7115_11_2016_1.1
2
1 EDGE makes mobile (cell) phones. It operates in a competitive market. The Marketing manager
believes that because EDGE is good at maintaining customer loyalty demand for its phones is price
inelastic. Its best selling product, Z, is near the end of its product life cycle. The Marketing manager
has to decide whether to spend money on developing new products or use extension strategies
for product Z.
T
X
15%
20%
Z Y
40% 25%
Total quantity sold: 800 000
Fig. 1: EDGE – quantity sold by product type in 2015
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the quantity of product Z sold in 2015.
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Explain the possible effect on EDGE if the prices of its products are reduced.
...........................................................................................................................................
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© UCLES 2016 06_7115_11_2016_1.1

3
(d) Identify and explain two advantages to EDGE of developing new products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two extension strategies that EDGE could use for product Z. Recommend which one
of the two strategies it should choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2016 06_7115_11_2016_1.1 [Turn over

4
2 Bushall is a farm. This primary sector business grows award-winning fruits such as pineapples and
bananas. Bushall has 10 full-time and 50 part-time employees. All part-time job vacancies are
advertised on its website. The Government has introduced legal controls for employment including
a minimum wage of $8.50 per hour and a limit on the number of hours an employee can work each
week. The farm manager has said to Bushall’s owners: ‘Taylor’s theory of motivation might not
work. Our team of employees enjoy what they do. These laws are not good for our employees or
our business!’
(a) Identify two examples (other than farming) of business activity in the primary sector.
Example 1: ........................................................................................................................
Example 2: ........................................................................................................................ [2]
(b) Identify two ways (other than its website) that Bushall could use to advertise job vacancies.
Way 1: ...............................................................................................................................
Way 2: ............................................................................................................................... [2]
(c) Identify and explain two possible reasons why ‘Taylor’s theory of motivation might not work’
at Bushall.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_7115_11_2016_1.1

5
(d) Identify and explain two advantages to Bushall of having part-time employees.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that the new legal controls for employment will benefit Bushall’s employees?
...........................................................................................................................................
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© UCLES 2016 06_7115_11_2016_1.1 [Turn over

6
3 Rafiq is the Operations manager at a small factory. The business makes a range of soft drinks
using batch production. Last year Rafiq successfully introduced just-in-time inventory control, based
on an idea from one of the 40 employees. As the business is planning to expand, Rafiq thinks it
would be a good idea to change to flow production.
Table 1: Income statement for 2015 ($000)
Revenue X
Cost of sales 360
Gross profit 240
Expenses Y
Profit 120
Retained profit 100
(a) What is meant by ‘cost of sales’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Refer to Table 1. Calculate:
X ........................................................................................................................................
Y ........................................................................................................................................ [2]
(c) Identify and explain two possible reasons why profit is important for this business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_7115_11_2016_1.1

7
(d) Identify and explain two advantages to this business of using just-in-time inventory control.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think this business should change to flow production? Justify your answer.
...........................................................................................................................................
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© UCLES 2016 06_7115_11_2016_1.1 [Turn over

8
4 Nuwan is a sole trader. He has a specialist sports shop selling a wide range of cricket and tennis
products. His 3 employees are trained to provide good customer service. Nuwan is pleased the
economy is growing but he is worried that interest rates might be increased. He believes his small
business has advantages compared to large retailers. Nuwan would like to improve profit margins
and thinks the best way to do this is to reduce costs.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible features which show that the economy is growing.
Feature 1: .........................................................................................................................
Feature 2: ......................................................................................................................... [2]
(c) Identify and explain two ways in which an increase in interest rates might affect Nuwan’s
business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_7115_11_2016_1.1

9
(d) Identify and explain two advantages that Nuwan’s business might have compared to large
retailers.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that the best way for Nuwan to improve profit margins is to reduce costs? Justify
your answer.
...........................................................................................................................................
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© UCLES 2016 06_7115_11_2016_1.1


*8522484085*

1 hour 30 minutes


06_7115_12_2016_1.1
2
1 Saltan makes a range of cars. The level of inventory is too high so it plans to decrease production
at its factory. Employees were told the business needs to reduce the size of its workforce as
competition is increasing. The trade union is not happy that 360 of the 1200 skilled full time
employees at Saltan will be made redundant. A trade union spokeswoman said: ‘Saltan should
reduce the number of hours of every employee rather than reduce the number of jobs.’ Saltan’s
Operations Director is considering ways to increase efficiency in the factory.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two situations (other than increasing competition) when a business might have to
reduce the size of its workforce.
Situation 1: ........................................................................................................................
...........................................................................................................................................
Situation 2: ........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible problems for Saltan of having a high level of inventory.
Problem 1: ........................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [4]
© UCLES 2016 06_7115_12_2016_1.1

3
(d) Identify and explain two ways Saltan could improve efficiency.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Saltan should reduce the number of working hours for every employee rather
than reduce the number of jobs? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2016 06_7115_12_2016_1.1 [Turn over

4
2 F&G is a leading fashion retailer. It has 20 shops in country C. The business uses market
segmentation. Its target market is men aged between 25 and 40 years old. The Marketing Director
has been looking at the marketing data shown in Table 1. She is worried that the amount the
business spends on marketing is not cost effective. She would like to close down all F&G shops
and just use e-commerce.
Table 1
Year Total value of the men’s F&G’s market share F&G’s marketing budget
clothing market
2015 $500m 15% $25m
2016 $700m 12% $40m
(a) What is meant by ‘marketing budget’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the value of F&G’s revenue in 2016.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two benefits of market segmentation to F&G.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_7115_12_2016_1.1

5
(d) Identify and explain two possible reasons why the amount F&G spends on marketing might
not be cost effective.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think F&G should close down all its shops and just use e-commerce? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_7115_12_2016_1.1 [Turn over

6
3 Alex and Raul are business partners. They started a bicycle repair business with their own savings
as the bank would not give them a loan. Raul does most of the repair work, while Alex manages
the accounts. Alex is surprised that the business has made a small profit in the first year. ‘We can
use this profit to expand. I don’t know why people think we would benefit from having a business
plan. Much of the demand for our repair business comes from our friends who own bicycles.’
Table 2: Extract from balance sheet as at 31 March 2016 ($)

Current assets 2500
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the working capital.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why working capital is important to Alex and Raul’s
business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 06_7115_12_2016_1.1

7
(d) Identify and explain two benefits to Alex of having a business partner.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Alex and Raul need a business plan for the business to be successful in the
future? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2016 06_7115_12_2016_1.1 [Turn over

8
4 KLG is based in country X. It specialises in making electrical parts which it sells to washing machine
manufacturers in country X. The Managing Director is planning to relocate to country Y, which is
a low-cost country. She said: ‘This will allow us to pay employees low wages for working long hours
as there are few legal controls on employment and health and safety. KLG cannot be both ethical
and profitable. Changes in exchange rates and import tariffs might cause us problems when we
start exporting.’
(a) What is meant by ‘import tariff’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two benefits to KLG of specialisation.
Benefit 1: ..........................................................................................................................
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Benefit 2: ..........................................................................................................................
........................................................................................................................................... [2]
(c) Explain how a change in exchange rates might affect KLG when exporting.
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(d) Identify and explain two factors (other than exchange rates and import tariffs) that KLG should
consider when deciding where to relocate.
Factor 1: ...........................................................................................................................
Explanation: ......................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: ......................................................................................................................
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(e) The Managing Director believes that ‘KLG cannot be both ethical and profitable.’ Do you agree?
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1 hour 30 minutes

06_7115_11_2017_1.4
2
1 QCH is a multinational company which makes a range of luxury cars. Last year it made a profit of
$700m. One of QCH’s objectives is to enter new markets. QCH wants to start producing cars in
country C, a fast growing economy. The Finance Director said: ‘Meeting customer needs is important.
We could form a joint venture or set up our own factory. Both options will be expensive, costing
$800m. I think QCH’s expansion into country C could be good for other businesses there.’
(a) What is meant by a ‘joint venture’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to QCH of having objectives.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why QCH might want to enter new markets.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two factors that QCH should consider when deciding the location of the
new factory.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Factor 2: ...........................................................................................................................
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Explanation: ......................................................................................................................
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(e) The Finance Director thinks QCH’s expansion into country C could be good for other businesses
there. Do you agree? Justify your answer.
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© UCLES 2017 06_7115_11_2017_1.4 [Turn over

4
2 Josh owns an office cleaning business. He has a number of large and small business customers.
Josh employs 6 full-time cleaners who are all given off-the-job training. Josh believes that using
the latest cleaning equipment increases added value. He said: ‘Customers are happy with the
service. I am always sending text (SMS) messages to workers about additional work.’ Josh has
been looking at his balance sheet. He cannot decide if a bank loan is the best source of finance to
use for new equipment. The new equipment will cost $60 000.
Table 1: Extract from Josh’s balance sheet as at 30 April 2017 ($000)
Current assets 120
Trade receivables 90
Cash X
Current liabilities Y
Net current assets 70
(a) What is meant by ‘trade receivables’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to Josh of using text (SMS)
messages as a method of internal communication.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify one advantage and one disadvantage to Josh of using off-the-job training.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think a bank loan is the best source of finance for Josh to use for the new equipment?
...........................................................................................................................................
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© UCLES 2017 06_7115_11_2017_1.4 [Turn over

6
3 Wilde Soup Stop (WSS) makes a range of soups and hot drinks. It owns 30 shops and has sold
its franchise to 10 other shops in country Z. The Marketing Director said: ‘Results from our focus
group show that being an ethical business is important’. WSS plans to extend its product range to
include curries and cakes. WSS will need to change its brand image. The Marketing Director cannot
decide whether to use sponsorship or newspaper advertising as the main method of promotion.
Fig.1: Existing logo for WSS
(a) Identify two ethical issues for a business.
Issue 1: .............................................................................................................................
...........................................................................................................................................
Issue 2: .............................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by a ‘focus group’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to WSS of selling its franchise.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_7115_11_2017_1.4

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(d) Identify and explain one advantage and one disadvantage to WSS of changing its brand image.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think WSS should use sponsorship or newspaper advertising as the main method of
promotion? Justify your answer.
...........................................................................................................................................
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© UCLES 2017 06_7115_11_2017_1.4 [Turn over

8
4 GKK makes plastic bottles for a range of products from food to chemicals. GKK buys its raw materials
from a low-cost country. GKK’s organisational structure is wide with a short chain of command
which allows for delegation. The Government plans to introduce new legal controls to protect the
environment. The Operations manager said: ‘The Government might achieve one of its objectives
but how does it affect GKK? This is a competitive market so prices are important.’ He wants to
improve efficiency and plans to use lean production.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two Government economic objectives.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two benefits to GKK of increasing efficiency.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify and explain two ways in which new legal controls to protect the environment might
affect GKK.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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...........................................................................................................................................
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Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Explain one lean production technique. Recommend whether GKK should introduce this
technique. Justify your answer.
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1 hour 30 minutes


06_7115_12_2017_1.4
2
1 Cheung owns a small retail shop in the city centre selling fashion clothing for children. As it is a
competitive market, Cheung knows market research is important. Cheung is worried about the
effect of an increase in shop rent on his costs. Cheung said: ‘I will have to pay this higher rent as
it is a good location. I need to increase revenue or reduce other costs.’ Cheung buys all his supplies
from a wholesaler located in a nearby town. He is thinking of buying directly from a clothing
manufacturer in another country.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify what will happen to each of the following when Cheung’s shop rent increases.
Variable cost: ....................................................................................................................
...........................................................................................................................................
Fixed cost: ........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why Cheung thinks the shop is in a good location.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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(d) Identify and explain two ways that Cheung could use to increase revenue.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think Cheung should change his supplier? Justify your answer.
...........................................................................................................................................
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© UCLES 2017 06_7115_12_2017_1.4 [Turn over

4
2 LWM makes car tyres in 15 different sizes using batch production. Last year LWM sold 60 million
tyres including 40 million tyres of its best-selling size. The Finance Director has been looking at
some financial data as shown in Table 1. She said: ‘Liquidity is important. I need to do some ratio
analysis to measure business performance. In the previous year our Return on Capital Employed
was 33%.’ The directors are worried about increased competition but they cannot decide on the
best way for LWM to respond.
Table 1: Extract of financial data for 2016 ($m)
Revenue 3000
Profit 1000
Capital employed 4000
(a) What is meant by ‘liquidity’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a director might want to measure business performance.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c)
(i) Calculate the Return on Capital Employed (ROCE) for 2016.
................................................................................................................................
................................................................................................................................ [2]
(ii) Explain what this result shows about LWM’s performance.
................................................................................................................................
................................................................................................................................
................................................................................................................................ [2]
© UCLES 2017 06_7115_12_2017_1.4

5
(d) Identify and explain one advantage and one disadvantage to LWM of using batch production.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two ways in which LWM might respond to increased competition. Recommend which
way LWM should choose. Justify your answer.
...........................................................................................................................................
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© UCLES 2017 06_7115_12_2017_1.4 [Turn over

6
3 Five years ago Manisha started making cakes for celebrations, such as weddings and birthdays,
from her home. Now she has a small shop and 3 employees. Product quality is important to her
business. Manisha said: ‘I have benefited from the economic boom but I did not expect demand to
increase by 500% each year. Somehow I have managed to cope with higher interest rates and all
the challenges of being a sole trader. The business is profitable at last but I have to work every
day.’ A friend has offered to become Manisha’s business partner.
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Identify two factors which might affect demand for Manisha’s products.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which higher interest rates might affect Manisha’s business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_7115_12_2017_1.4

7
(d) Identify and explain two reasons why product quality might be important to Manisha’s business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Manisha should have a business partner? Justify your answer.
...........................................................................................................................................
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© UCLES 2017 06_7115_12_2017_1.4 [Turn over

8
4 Steppa is a shoe manufacturer in the private sector. Steppa has 200 employees who all receive a
high hourly wage rate. The Human Resources Director said: ‘We use a democratic leadership style.
Employees are an important stakeholder group. Happy workers are good for business. Revenue
increased by 10% last year.’ The director cannot understand why a high number of workers leave
the business each year. She is looking at other non-financial methods to motivate employees.
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) What is meant by ‘private sector’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Identify and explain two effects on Steppa of a high number of workers leaving the business
each year.
Effect 1: .............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Effect 2: .............................................................................................................................
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Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 06_7115_12_2017_1.4

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(d) Identify and explain two possible advantages for Steppa of using a democratic leadership
style.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two methods of non-financial reward that Steppa might use to increase employee
motivation. Recommend which method Steppa should use. Justify your answer.
...........................................................................................................................................
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1 hour 30 minutes


06_7115_11_2018_1.1
2
1 GKA is a food retailer. It has 300 shops located in areas where average consumer incomes are
low. GKA sells a limited range of own-label products including breakfast cereal and toothpaste.
GKA does no promotion or market research. The Managing Director said: ‘Last year our market
share increased to 5%. Profit increased by 40%. Keeping costs low means GKA can offer customers
quality products at low prices.’ GKA is planning to open 100 shops in areas with high average
consumer incomes.The Managing Director must decide whether GKA should change its pricing
strategy (method) as the business expands.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two aims of promotion.
Aim 1:................................................................................................................................
...........................................................................................................................................
Aim 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two methods of market research that GKA could use.
Method 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Method 2:...........................................................................................................................
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Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_7115_11_2018_1.1

3
(d) Identify and explain two ways in which GKA could keep costs low.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think GKA should change its pricing strategy as the business expands? Justify your
answer.
...........................................................................................................................................
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© UCLES 2018 06_7115_11_2018_1.1 [Turn over

4
2 SJD is in the private sector. It makes steel for construction businesses. SJD plans to make 3500
of its 9000 employees redundant. The Operations Director said: ‘Cheap steel imports and high
business tax rates are affecting our business. There are also ethical issues that we must respond
to. The Government should do more to help steel producers. Some of our competitors plan to close
their factories and relocate to other countries. SJD may have to do the same.’
(a) Identify two situations in which downsizing the workforce might be necessary.
Situation 1:.........................................................................................................................
...........................................................................................................................................
Situation 2:.........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible ethical issues that SJD might have to respond to.
Issue 1:..............................................................................................................................
...........................................................................................................................................
Issue 2:..............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible problems for SJD if it decides to relocate its business.
Problem 1:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Problem 2:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_7115_11_2018_1.1

5
(d) Explain how each of the following factors might affect SJD’s business.
High business tax rates:....................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Cheap imports:..................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the Government should help businesses like SJD? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2018 06_7115_11_2018_1.1 [Turn over

6
3 IBH is a family-owned private limited company. It makes a range of shoes for children, using batch
production. It is a competitive market. Like many businesses, IBH needs finance for a number of
reasons. The Finance Director has been looking at some financial data. An extract is shown in
Table 1. Some of the directors would like to expand into the women’s shoe market and want to
know whether IBH’s performance is improving.
Table 1: Extract from financial data for IBH ($000)
2016 2017
Revenue 400 480
Profit 120 120
Non-current liabilities 100 200
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might need finance.
Reason 1:..........................................................................................................................
Reason 2:.......................................................................................................................... [2]
© UCLES 2018 06_7115_11_2018_1.1

7
(c) Identify and explain two possible advantages to IBH of being a private limited company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to IBH of using batch production.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 06_7115_11_2018_1.1 [Turn over

8
(e) Do you think IBH’s performance has improved in 2017? Justify your answer using profit margins.
...........................................................................................................................................
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© UCLES 2018 06_7115_11_2018_1.1

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4 Ben owns a small gardening business, which he started 15 years ago. Ben believes providing a
quality service is important to his success. Ben’s business has a number of stakeholder groups
including 2 full-time and 4 part-time workers who have all been employed by him for a number of
years. Each worker is expected to do any job that Ben orders them to do. All workers are paid an
hourly wage rate. They also receive a bonus if customers recommend the business to other people.
Ben is always thinking about other ways to improve the motivation of his workers.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons why Ben’s business has remained small.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why quality might be important for Ben’s business.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_7115_11_2018_1.1 [Turn over

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(d) Identify and explain two advantages to Ben’s business of having part-time workers.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Explain two ways Ben could improve employee motivation. Recommend which way Ben should
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1 hour 30 minutes

06_7115_12_2018_1.1
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1 Adele started a dance school five years ago. Every year Adele pays herself a salary and makes
$1000 profit. The school offers a range of dance and exercise classes for children. It is a sole trader
business. Adele believes using the right pricing method is important. Adele wants to expand the
business by opening a second dance school. Based on her business plan, she forecasts that this
will cost $8000. Adele cannot decide whether a bank loan is the best source of finance for this
expansion.
Feature 1:..........................................................................................................................
...........................................................................................................................................
Feature 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two of the main sections of a business plan.
Section 1:...........................................................................................................................
...........................................................................................................................................
Section 2:...........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why using the right pricing method is important for Adele’s
business.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2018 06_7115_12_2018_1.1

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(d) Identify and explain two location factors that Adele should consider when deciding on a second
school.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Factor 2:............................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think that a bank loan is the best source of finance for Adele to use to expand the
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© UCLES 2018 06_7115_12_2018_1.1 [Turn over

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2 JSF is a business in the private sector. It has 50 production workers who operate machines. JSF
makes a range of household products including towels and bed sheets. Most of the products are
sold to retail businesses that take two months to pay JSF. The business is given two weeks’ credit
to pay its suppliers. The Finance manager has just prepared a cash flow forecast. He said: ‘Cash
outflows are too high. I have already reduced the budget for market research to zero. Training costs
are $1000 per month and cannot be reduced as training is important.’ The Finance manager is
thinking of other ways to improve cash flow.
Table 1: Cash flow forecast for JSF for the period July–September 2017 ($000)
Closing balance 30 10 Y
(a) What is meant by a cash flow forecast?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X : .......................................................................................................................................
Y: ....................................................................................................................................... [2]
(c) Identify and explain two benefits to JSF of market research.
Benefit 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Benefit 2:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 06_7115_12_2018_1.1

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(d) Identify and explain two reasons why training is important to JSF.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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........................................................................................................................................... [6]
(e) Explain two ways (other than lower training costs) that JSF could improve its cash flow position.
Which way do you think JSF should use? Justify your answer.
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© UCLES 2018 06_7115_12_2018_1.1 [Turn over

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3 DPC operates 200 takeaway pizza shops. Over 75% of its pizzas are ordered through e-commerce.
The Managing Director thinks 2017 was a successful year. She said: ‘Looking ahead, there are
signs that the economy is growing. However, DPC has a number of challenges. The Government
plans to increase the minimum wage to $5 per hour. DPC has to respond to environmental pressures
as well. Food waste and litter caused by used pizza boxes are problems. Complaints from the local
community about this are too high.’
(a) Identify two ways to measure business success.
Way 1:................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two features of a growing economy.
Feature 1:..........................................................................................................................
...........................................................................................................................................
Feature 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which an increase in the minimum wage could affect DPC.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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© UCLES 2018 06_7115_12_2018_1.1

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(d) Identify and explain two advantages to DPC of using e-commerce.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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........................................................................................................................................... [6]
(e) Explain two ways in which DPC could respond to environmental pressures. Recommend which
of the two options it should choose. Justify your answer.
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© UCLES 2018 06_7115_12_2018_1.1 [Turn over

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4 JKL uses job production to make clocks. JKL buys all its raw materials locally and exports 60% of
its products. The business has high fixed costs. JKL has 30 skilled employees. Many of them work
part-time and delegation is encouraged. All workers receive an email from management every day
to keep them informed about production issues. The Human Resources Director said: ‘I think it is
more cost-effective to try to retain our existing workers rather than to recruit new employees.’ The
Director wants to reduce barriers to communication, as he knows effective communication is
important to help JKL meet its objectives.
(a) Identify two reasons for a business having objectives.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two fixed costs for JKL.
Cost 1:...............................................................................................................................
...........................................................................................................................................
Cost 2:...............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to JKL of using job production.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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(d) Identify two possible barriers to communication for JKL. For each barrier, explain how JKL
could reduce or remove it.
Barrier 1:............................................................................................................................
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Barrier 2:............................................................................................................................
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(e) Do you agree that it is better for JKL to try to retain existing workers rather than recruit new
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1 hour 30 minutes


06_7115_11_2019_1.1
2
1 Y2M is a bus operating company in the public sector. One of its objectives is to break even on
every bus route. Most of its competitors are in the private sector. Y2M wants to increase the number
of customers using its buses. The Finance Director has been looking at some cost data shown in
Table1. This is because Y2M plans to review its pricing methods. She is worried other businesses
pay workers a higher wage rate and some of its drivers may leave. She said: ‘To pay the same
wage rate would increase variable cost to $2.20 per passenger per journey.’
Table 1: Cost and price data for one Y2M route
Number of passengers per day 90
Price per passenger per journey $2.50
Variable cost per passenger per journey $2
(a) What is meant by ‘break-even’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the revenue per day.
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two objectives Y2M might have if it was in the private sector.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Objective 2: .......................................................................................................................
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Explanation: ......................................................................................................................
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© UCLES 2019 06_7115_11_2019_1.1

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(d) Identify and explain two pricing methods Y2M could use.
Pricing method 1: ..............................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Pricing method 2: ..............................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Y2M should pay its workers the same wage rate as its competitors? Justify your
answer.
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© UCLES 2019 06_7115_11_2019_1.1 [Turn over

4
2 Kate is an entrepreneur. Two years ago she left her job as a fashion designer at a multinational
company. She started up BBB, a women’s sportswear clothing business. BBB targets a market
segment of high income consumers. BBB’s products are sold in 3 retail shops and also through its
website. Kate said: ‘I saw a gap in the market and took the risk. Obtaining the finance I needed
from the bank was not easy. I enjoy making decisions such as using leaflets to promote the clothes.’
BBB’s revenue target for next year is $500 000.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why obtaining finance may not be easy for a new business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why Kate decided to start up her own business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_7115_11_2019_1.1

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(d) Identify and explain two reasons why segmenting the market might help BBB.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that using leaflets is the best way for Kate to promote her products? Justify your
answer.
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© UCLES 2019 06_7115_11_2019_1.1 [Turn over

6
3 BVC makes a range of paints. It exports 60% of its products. The Managing Director has been
looking at BVC’s cash-flow forecast shown in Table 2. He said: ‘Success is not just about our return
on capital employed.’ The Managing Director is worried about the introduction of new legal controls
to protect the environment. This will mean BVC will have to reduce the number of chemicals that
are used to make paint. He thinks these new legal controls will be bad for business.
Table 2: Extract of cash flow forecast for the period July–September 2019 ($000)

Net cash flow 40 20 Y
Opening balance X 60 80
(a) What is meant by ‘return on capital employed’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the following values:
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain two reasons why a cash flow forecast might be important for BVC.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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© UCLES 2019 06_7115_11_2019_1.1

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(d) Identify and explain two possible problems for BVC when exporting its products.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) The Managing Director thinks the new legal controls to protect the environment will be bad for
business. Do you agree? Justify your answer.
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© UCLES 2019 06_7115_11_2019_1.1 [Turn over

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4 FGH is a private limited company. FGH has a tall hierarchical organisational structure. It is a book
retailer which plans to take over one of its competitors for $800m. If the takeover happens, FGH
would have 6 500 bookshops across 20 countries. FGH’s Managing Director said: ‘We expect to
reduce total costs by $300m each year after the takeover. We will stop all off-the-job training of
employees.’ The Managing Director thinks FGH would benefit from becoming a public limited
company but some of the other directors cannot decide if this is a good idea.
(a) What is meant by ‘off-the-job training’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) What is meant by ‘total cost’?
...........................................................................................................................................
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(c) Identify and explain two advantages of FGH having a tall hierarchical organisational structure.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_7115_11_2019_1.1

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(d) Identify and explain one advantage and one disadvantage to FGH of becoming a public limited
company.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think FGH should take over the other business? Justify your answer.
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1 hour 30 minutes


06_7115_12_2019_1.1
2
1 PLK is a social enterprise which offers training to young people who leave school with no
qualifications. The young people are trained by PLK chefs to prepare food which is sold at local
markets or sporting events. Choosing the right method of promotion is important. The manager of
PLK thinks that to increase profit it is better to raise prices rather than use cheaper food ingredients.
Table 1: Cost and sales information for PLK
Number of meals sold per week 1000
Price per meal $3
Variable cost per meal $2
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) What is meant by ‘fixed costs’?
...........................................................................................................................................
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(c) Calculate PLK’s weekly profit.
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© UCLES 2019 06_7115_12_2019_1.1

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(d) Identify and explain two methods of promotion PLK might use to increase sales.
Method 1: ..........................................................................................................................
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Explanation: ......................................................................................................................
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Method 2: ..........................................................................................................................
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Explanation: ......................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) Do you agree with PLK’s manager that to increase profit it is better to raise prices rather than
use cheaper ingredients? Justify your answer.
...........................................................................................................................................
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© UCLES 2019 06_7115_12_2019_1.1 [Turn over

4
2 JNK makes pottery including plates and bowls for the mass market, using batch production. Quality
control is important. JNK has 30 unskilled employees, who are all paid the legal minimum wage.
JNK uses job enrichment to keep workers motivated. Due to an increase in demand, JNK is planning
to replace its old machines with new technology. The Managing Director thinks that some of the
low cost materials purchased by JNK are produced using child labour. One of JNK’s competitors
has recently introduced a new ethical policy.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘job enrichment’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which employees at JNK could be affected by the introduction
of new technology.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_7115_12_2019_1.1

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(d) Identify and explain two ways (other than new technology) that JNK could use to increase
output.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think JNK should become more ethical? Justify your answer.
...........................................................................................................................................
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© UCLES 2019 06_7115_12_2019_1.1 [Turn over

6
3 REW has won many awards for the design and style of its carpets and rugs. All the wool it uses is
from local suppliers. REW’s objective for this year is to survive and remain in business. The Managing
Director is concerned that the country’s Gross Domestic Product has been falling for some time.
During the recession the Managing Director plans to start selling REW’s products in other countries.
Market research suggests demand would be high.
Table 2: Extract from REW’s accounts
2017 2018
Current ratio 1.5 2
Acid test ratio 1.2:1 1:1
Profit margin 20% 16%
(a) What is meant by ‘Gross Domestic Product’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible effects on businesses from falling Gross Domestic Product.
Effect 1: .............................................................................................................................
...........................................................................................................................................
Effect 2: .............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why REW’s objectives might change over time.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_7115_12_2019_1.1

7
(d) Identify and explain the effect on REW of the changes in the following ratios.
Change in acid test ratio: ..................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Change in profit margin: ...................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think REW should start selling its products in other countries? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2019 06_7115_12_2019_1.1 [Turn over

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4 George has worked in a small flower shop for 10 years. He does not like the autocratic leadership
style of his manager and wants to leave. He will decide whether to start up his own business or
buy a BunchesRUs franchise. The franchise would cost him $5 000 but BunchesRUs would offer
training and support. For either option, George will need both finance and to recruit 2 part-time
employees. George knows building customer relationships will be important to the success of his
business.
(a) What is meant by ‘autocratic leadership style’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible sources of finance George could use.
Source 1: ..........................................................................................................................
...........................................................................................................................................
Source 2: ..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why building good customer relationships might be important
to the success of George’s business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 06_7115_12_2019_1.1

9
(d) Identify and explain one advantage and one disadvantage to George’s business of having
part-time employees.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think George should buy a BunchesRUs franchise? Justify your answer.
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Cambridge O Level

*2673042145*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_7115_11_2020_1.4
2
1 Kara’s business makes wax candles. She sells them to retailers at low prices. She gives retailers
60 days to pay. Kara has to pay her suppliers when raw materials are delivered. Kara used
crowd-funding to set up her business. The bank would not give Kara a loan as she did not have a
business plan. Last year revenue was $50 000. Demand is increasing but Kara is not yet able to
benefit from economies of scale. She said: ‘Cash-flow is a problem. All cash inflows are used to
buy inventory.’
(a) Define ‘crowd-funding’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two economies of scale.
Economy of scale 1...........................................................................................................
...........................................................................................................................................
Economy of scale 2...........................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why a bank might want Kara to produce a business plan before agreeing
to give a loan.
Reason 1: .........................................................................................................................
...........................................................................................................................................
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Reason 2: .........................................................................................................................
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(d) Explain two factors Kara should consider when deciding whether to increase prices.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think delaying payments to suppliers is the best way for a small business to improve
its cash-flow? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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2 BCK is a multinational company which operates many gold mines. One of BCK’s objectives is to
contribute to sustainable development. The Managing Director said: ‘We value all of our stakeholders.
With 10 000 employees it is important to have the right leadership style. BCK needs well-motivated
employees.’ The Managing Director also thinks that effective communication with suppliers is very
important.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two ways of motivating employees.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
(c) State four factors that might affect the leadership style used by a manager.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Factor 3: ...........................................................................................................................
...........................................................................................................................................
Factor 4: ...........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 06_7115_11_2020_1.4

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(d) Explain two ways BCK could contribute to sustainable development.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think using communication methods based on information technology (IT) is the best
way for a large business to communicate with its suppliers? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2020 06_7115_11_2020_1.4 [Turn over

6
3 NWA is a large and profitable airline business. It has grown quickly over the past 10 years and new
aeroplanes have helped to improve its brand image. NWA offers low priced flights for tourists to
50 countries. Sales promotion is an important part of NWA’s marketing mix. The Finance Director
is worried that NWA has a high level of debt as its main source of finance is bank loans. The
organisational chart of NWA has many levels of hierarchy with narrow spans of control.
Table 3.1
Cost and price data for a typical NWA flight (2019)
Fixed costs $2 000
Maximum number of customers 200
(a) Define ‘brand image’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the break-even number of customers for a typical NWA flight. Show your working.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible problems for NWA of having a high level of debt.
Problem 1: ........................................................................................................................
...........................................................................................................................................
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Problem 2: ........................................................................................................................
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7
(d) Explain how two methods of sales promotion could increase sales for NWA.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that having many levels of hierarchy is the best type of organisational structure
for a large business? Justify your answer.
...........................................................................................................................................
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© UCLES 2020 06_7115_11_2020_1.4 [Turn over

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4 BMT is a business partnership owned by 2 brothers. The brothers received government support
when they started BMT 6 years ago. BMT now has 30 employees who make high quality watches.
The business tries to achieve lean production. Demand has increased each year and in 2019 BMT
sold 8000 watches. BMT makes some parts for watches and all the other parts are imported. BMT
had to consider a number of factors, including exchange rates, when deciding whether to import
parts for watches.
(a) Identify two reasons why a government might support business start-ups.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(b) State two types of business organisation (other than partnership).
Type 1: ..............................................................................................................................
...........................................................................................................................................
Type 2: ..............................................................................................................................
........................................................................................................................................... [2]
(c) Outline two disadvantages of BMT being a business partnership.
Disadvantage 1: ................................................................................................................
...........................................................................................................................................
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Disadvantage 2: ................................................................................................................
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........................................................................................................................................... [4]
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(d) Explain two ways BMT could achieve lean production.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the exchange rate is the most important factor for a business to consider when
deciding whether to import parts for a high quality product? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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Cambridge O Level

*7590251497*

1 hour 30 minutes
INSTRUCTIONS
• Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs
INFORMATION
06_7115_12_2020_1.3
2
1 DWT makes solar panels in country Y. This is a low-cost country which is experiencing rapid
economic growth. DWT’s production method makes use of specialisation. All 120 of DWT’s
employees know that ensuring quality production is important. DWT imports some of its raw materials.
The Government of country Y plans to introduce import tariffs of 50%. DWT’s Managing Director
said: ‘This decision will affect all of our stakeholders. Why do governments introduce trade restrictions
such as import controls?’
(a) Define ‘specialisation’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a government might introduce import controls.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways DWT could try to ensure quality production.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Way 2: ...............................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [4]
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(d) Explain one objective of each of the following stakeholder groups of DWT.
Customers: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Pressure groups: ..............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that all businesses will benefit from operating in a country which is experiencing
rapid economic growth? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2020 06_7115_12_2020_1.3 [Turn over

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2 MLC makes motorcycles. The Managing Director has been analysing MLC’s costs. An extract of
this information is shown in Table 2.1. To reduce average costs, MLC plans to close its factory and
relocate production to another country. Only 50 of the existing employees will be offered jobs at
the new location. The trade union has been informed. All the new employees will be given either
on-the-job training or off-the-job training. This planned relocation will have an impact on MLC’s
income statement.
Table 2.1
Cost and other information for MLC’s current factory (2019)
Total output (units) 3 000
Total cost $1 200 000
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the average cost of one motorcycle. Show your working.
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) State four features of an income statement.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
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Feature 3: .........................................................................................................................
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Feature 4: .........................................................................................................................
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© UCLES 2020 06_7115_12_2020_1.3

5
(d) Explain two possible problems for MLC of relocating its operations to another country.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think on-the-job training is a better method of training for a manufacturing business to
use than off-the-job training? Justify your answer.
...........................................................................................................................................
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© UCLES 2020 06_7115_12_2020_1.3 [Turn over

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3 Kala always wanted to be an entrepreneur. She used to work for a business which downsized its
workforce 5 years ago. She then decided to start up CHL. She produced a business plan which
helped her obtain finance. Kala now designs customised sports clothes for women. Kala sells these
products directly to customers using e-commerce. She has a loyal customer base of 25-40 year
olds. However, Kala is worried about increased competition in this niche market. One idea she has
is to target different market segments.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might downsize its workforce.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why Kala’s business might need finance.
Reason 1: .........................................................................................................................
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Reason 2: .........................................................................................................................
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© UCLES 2020 06_7115_12_2020_1.3

7
(d) Explain one advantage and one disadvantage to Kala of using e-commerce to sell her products.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think selling to different market segments is the best way for a small business to respond
to increased competition? Justify your answer.
...........................................................................................................................................
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© UCLES 2020 06_7115_12_2020_1.3 [Turn over

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4 ALB is a large bank. It has 300 branches and 5 000 employees. ALB provides a range of financial
services to its business customers. As it operates in a competitive market, ALB aims to maintain
customer loyalty. Last year ALB’s profit decreased to $3 000m. The Managing Director is analysing
ways to reduce ALB’s costs. She also has to decide how new legal controls over employment
issues might affect the business. The Government plans to improve protection of employees by
changing laws on the minimum wage and health and safety.
(a) Define ‘profit’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two problems of using the number of employees to measure the size of a business.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible ways ALB can try to reduce its costs.
Way 1: ...............................................................................................................................
...........................................................................................................................................
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Way 2: ...............................................................................................................................
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9
(d) Explain two ways ALB could improve customer loyalty.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think changes in legal controls over employment issues will always reduce business
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Cambridge O Level

*1420861250*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_7115_11_2021_1.3
2
1 BKH is a large public limited company. It has 2 000 employees across 18 locations. BKH sells a
range of insurance products including house and car insurance. BKH’s shareholders want the
business to increase profit. The Managing Director knows increasing profit can conflict with the
objectives of other stakeholder groups. She said: ‘Private sector businesses have different objectives
to public sector organisations.’ BKH is also planning to expand by taking over another insurance
company.
(a) Define ‘public sector’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘profit’.
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Identify four ways to measure the size of a business.
Way 1: ...............................................................................................................................
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Way 2: ...............................................................................................................................
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Way 3: ...............................................................................................................................
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Way 4: ...............................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_7115_11_2021_1.3

3
(d) Explain one way each stakeholder’s objectives might conflict with BKH’s objective to increase
profit.
Customers objective: ........................................................................................................
...........................................................................................................................................
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Employees objective: ........................................................................................................
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(e) Do you think economies of scale are the most important reason for taking over another
...........................................................................................................................................
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© UCLES 2021 06_7115_11_2021_1.3 [Turn over

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2 PJA make fashion clothing for 16-25 year olds. Many of its competitors are multinational companies.
PJA produce new products every 3 weeks. All PJA’s products are made in a local factory because
of import quotas. The Managing Director is reviewing PJA’s financial statements using ratio analysis.
An extract is shown in Table 2.1.
Table 2.1
Extract from PJA’s financial statements for 2020
Revenue ($m) 7 400
Gross profit ($m) 3 330
Profit ($m) 1 100
Current ratio 1.5
(a) Define ‘import quota’.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate PJA’s gross profit margin.
Show your working.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline one benefit and one limitation to PJA of developing new products.
Benefit: .............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Limitation: .........................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [4]
© UCLES 2021 06_7115_11_2021_1.3

5
(d) Explain two ways PJA’s managers can use ratio analysis.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think multinational companies always benefit the countries they operate in? Justify
your answer.
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2021 06_7115_11_2021_1.3 [Turn over

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3 Alex started APB as a sole trader business 4 years ago. APB provide printing services for local
businesses such as leaflets and brochures. Alex thinks having a good location is important to any
business. All APB’s 6 employees receive on-the-job training. Alex has a democratic leadership
style and uses job rotation to help keep employees motivated. To meet an increase in demand,
Alex plans to buy an additional printing machine. This will cost $1 800. Alex has to decide on an
appropriate source of finance.
(a) Define ‘job rotation’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) State two factors that a service sector business should consider when deciding where to
locate.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to APB of using on-the-job training.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_7115_11_2021_1.3

7
(d) Explain one advantage and one disadvantage of Alex having a democratic leadership style.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the amount of money needed is the most important factor for a sole trader to
consider when deciding on an appropriate source of finance? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2021 06_7115_11_2021_1.3 [Turn over

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4 Economic growth in country X has created many opportunities for new businesses such as TGH.
TGH manufacture a range of personalised mobile (cell) phone cases using job production. Quality
assurance is important to all 8 employees. TGH operate in a niche market. The Marketing Manager
uses e-commerce as TGH’s channel of distribution. She is considering ways to build customer
relationships.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘quality assurance’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why building customer relationships might be important to TGH.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 06_7115_11_2021_1.3

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(d) Explain one advantage and one disadvantage to TGH of using job production.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think cost-plus is the best pricing method for a new business to use when selling
products to a niche market? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
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© UCLES 2021 06_7115_11_2021_1.3

Cambridge O Level

*8367659240*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_7115_12_2021_1.2
2
1 Pamela is a sole trader. She started her successful photography business 30 years ago. She
specialises in taking pictures of people and places for use in posters, calendars and fashion
magazines. It is a niche market. Pamela uses cost-plus pricing as part of her marketing mix. Offering
a high quality service is important to Pamela and her 2 employees.
(a) Define ‘cost-plus pricing’.
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(b) Define ‘marketing mix’.
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(c) Outline two reasons why offering a high quality service might be important for Pamela’s
business.
Reason 1: .........................................................................................................................
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Reason 2: .........................................................................................................................
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(d) Explain two advantages to Pamela of operating as a sole trader.
Advantage 1: ....................................................................................................................
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Explanation: ......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think operating in a niche market will help a small business have a better chance of
success than operating in a mass market? Justify your answer.
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2 NPX is an online retail business. All orders are sent directly to customers from its warehouse. NPX
employs 60 full-time workers. The Operations Manager is analysing NPX’s cash-flow forecast. An
extract is shown in Table 2.1. To improve productivity, the manager plans to introduce new
technology that can select and pack all the items for each order. This will make 35 workers redundant.
The technology will cost $40 000. The manager is considering using either internal sources or
external sources to finance this technology.
Table 2.1
NPX’s cash-flow forecast for the period July – September 2021 ($000)
Net cash flow 10 30 30
(a) Define ‘opening balance’.
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(b) State two ways a business can increase productivity.
Way 1: ...............................................................................................................................
Way 2: ............................................................................................................................... [2]
(c) Identify four sources of internal finance a business might use.
Source 1: ..........................................................................................................................
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Source 2: ..........................................................................................................................
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Source 3: ..........................................................................................................................
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Source 4: ..........................................................................................................................
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(d) Explain two possible effects on NPX’s cash-flow forecast of introducing the new technology.
Effect 1: .............................................................................................................................
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Explanation: ......................................................................................................................
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Effect 2: .............................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think it is better for a tertiary sector business to use full-time employees rather than
part-time employees? Justify your answer.
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© UCLES 2021 06_7115_12_2021_1.2 [Turn over

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3 GHT is a public limited company. It produces steel products including gates and garage doors.
GHT has a flat organisational structure and a short chain of command. GHT has many stakeholder
groups including 600 employees. The Managing Director is considering introducing job rotation to
improve employee motivation. He has also been analysing some financial data. An extract is shown
in Table 3.1.
Table 3.1
Extract of revenue and cost data for one of GHT’s products (product X)
Units sold in 2020 30 000
Price per unit $100
Variable costs per unit $60
Break even output (units) 22 500
(a) Define ‘fixed cost’.
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(b) Calculate the margin of safety for product X in 2020.
Show your working.
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(c) Outline two advantages to GHT of having a short chain of command.
Advantage 1: ....................................................................................................................
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Advantage 2: ....................................................................................................................
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(d) Explain one advantage and one disadvantage to GHT of using job rotation to improve employee
motivation.
Advantage: .......................................................................................................................
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Explanation: ......................................................................................................................
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Disadvantage: ...................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think the shareholders are the most important stakeholder group to the success of a
limited company? Justify your answer.
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4 Raul owns a small farm that grows oranges. His farm is based in country Z. Like all primary sector
activities, farming creates external costs and external benefits. Raul sells all 600 tonnes of his
oranges direct to a drinks manufacturer in country E. The Government of country E plan to introduce
either import tariffs or quotas. Raul said: ‘This might help country E’s Government achieve one of
its economic objectives but how will it affect companies that export to country E?’
(a) Define ‘primary sector’.
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(b) Identify two government economic objectives.
Objective 1: .......................................................................................................................
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Objective 2: .......................................................................................................................
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(c) Outline one external benefit and one external cost that Raul’s business activity might create.
External benefit: ................................................................................................................
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External cost: ....................................................................................................................
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(d) Explain two advantages to Raul’s business of selling direct to a manufacturer.
Advantage 1: ....................................................................................................................
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Explanation: ......................................................................................................................
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Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think the introduction of import tariffs is likely to have a greater effect than the
introduction of import quotas on an exporting business? Justify your answer.
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© UCLES 2021 06_7115_12_2021_1.2

Cambridge O Level

*0892969563*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_7115_14_2021_1.8
2
1 Marty owns a book shop in the city centre. He has been analysing the financial performance of his
business. An extract from the accounts is shown in Table 1.1. In the last 2 years, revenue has
decreased by 50%. Marty thinks increased competition is one reason for this. Marty plans to change
his pricing strategy. He is also considering the different methods of promotion he could use to
increase sales.
Table 1.1
Extract from Marty’s income statement for year ending 31 December 2020 ($)
Revenue 80 000
Cost of sales X
Gross profit 60 000
Expenses 45 000
Profit Y
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X : .......................................................................................................................................
Y: ....................................................................................................................................... [2]
(c) Outline two possible problems the decrease in revenue might cause Marty’s business.
Problem 1: ........................................................................................................................
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Problem 2: ........................................................................................................................
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(d) Explain two pricing methods Marty could use.
Method 1: ..........................................................................................................................
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Explanation: ......................................................................................................................
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Method 2: ..........................................................................................................................
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Explanation: ......................................................................................................................
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(e) Explain two methods of promotion a small retail business could use to increase sales. Justify
which is the best method to use.
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© UCLES 2021 06_7115_14_2021_1.8 [Turn over

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2 STH is an ethical business. It manufactures beds. The beds are produced in batches of 10 by
employees working in teams. Delegation is encouraged so employees can reach the higher levels
of Maslow’s Hierarchy of Needs. All teams need to communicate regularly with management. The
Operations Manager is worried as the level of wasted materials has increased over the past 3
months. She wants to improve efficiency and has identified two options; increasing training or
introducing automation.
(a) Define ‘delegation’.
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(b) State two levels in Maslow’s Hierarchy of Needs.
1: .......................................................................................................................................
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2: .......................................................................................................................................
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(c) Identify four methods of internal communication a business can use.
Method 1: ..........................................................................................................................
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Method 2: ..........................................................................................................................
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Method 3: ..........................................................................................................................
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Method 4: ..........................................................................................................................
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© UCLES 2021 06_7115_14_2021_1.8

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(d) Explain one advantage and one disadvantage to STH of being ethical.
Advantage: .......................................................................................................................
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Explanation: ......................................................................................................................
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Disadvantage: ...................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think increasing training is a better way for a manufacturing business to improve
efficiency than introducing automation? Justify your answer.
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© UCLES 2021 06_7115_14_2021_1.8 [Turn over

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3 JCP is a small private limited company. This paper-making business was started 170 years ago.
JCP has many stakeholder groups, including 50 employees. The Managing Director said: ‘JCP is
always developing new products. We now produce products for the airline industry as well as
making paper.’ JCP exports its products to 60 countries.
Way 1: ...............................................................................................................................
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Way 2: ...............................................................................................................................
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(b) Identify two costs for a business of developing new products.
Cost 1: ..............................................................................................................................
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Cost 2: ..............................................................................................................................
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(c) Outline one objective each of the following stakeholder groups of JCP might have.
Employees: .......................................................................................................................
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Suppliers: ..........................................................................................................................
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(d) Explain two factors JCP should consider when exporting its products.
Factor 1: ...........................................................................................................................
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Explanation: ......................................................................................................................
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Factor 2: ...........................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think limited liability is the most important factor for business owners to consider when
deciding on an appropriate form of business organisation? Justify your answer.
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© UCLES 2021 06_7115_14_2021_1.8 [Turn over

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4 Last year economic growth in country Y increased from 2% to 5%. Rohit wants to start up a car
washing business in country Y. He will need to choose a suitable source of finance. Rohit has
calculated some data. An extract is shown in Table 4.1. He understands that all business activity
creates external costs. Rohit has to decide on a suitable location for his business.
Table 4.1
Forecast price, cost and customer data for Rohit’s business
Fixed cost per week $90
Number of customers per week 50
(a) Define ‘external cost’.
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(b) Calculate Rohit’s forecast break-even output. Show your working.
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(c) State four possible sources of finance a start-up business could use.
Source 1: ..........................................................................................................................
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Source 2: ..........................................................................................................................
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Source 3: ..........................................................................................................................
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Source 4: ..........................................................................................................................
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(d) Explain two ways economic growth might affect Rohit’s business.
Way 1: ...............................................................................................................................
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Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think the cost of rent is a more important location factor for a start-up business than
the level of competition? Justify your answer.
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© UCLES 2021 06_7115_14_2021_1.8

Cambridge O Level

*5897975677*

1 hour 30 minutes

INSTRUCTIONS
INFORMATION
06_7115_11_2022_1.1
2
1 Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys
and candy (sweets). When Pamela started her business 30 years ago she had no help to manage
the shop. She now has 5 employees. Pamela knows maintaining customer loyalty is important.
She uses competitive pricing. Most of her marketing budget is spent on sales promotion. Pamela
does not use e-commerce.
(a) Define ‘competitive pricing’.
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(b) Define ‘marketing budget’.
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(c) Outline two possible threats to Pamela’s business of using e-commerce.
Threat 1: ...........................................................................................................................
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Threat 2: ...........................................................................................................................
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(d) Explain two methods Pamela’s business can use to maintain customer loyalty.
Method 1: ..........................................................................................................................
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Explanation: ......................................................................................................................
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Method 2: ..........................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think being a risk-taker is a more important characteristic of a successful entrepreneur
than being creative? Justify your answer.
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© UCLES 2022 06_7115_11_2022_1.1 [Turn over

4
2 CTF is a public limited company. It manufactures beds using batch production. The Operations
Director is using break-even analysis to calculate the margin of safety for children’s beds. An extract
from CTF’s output data is shown in Table 2.1. The Operations Director wants to know how an
increase in inflation might affect CTF. She knows there are many environmental pressures that a
manufacturing business could respond to.
Table 2.1
Extract from CTF’s output data (children’s beds per month)
Break-even output 14 000
Current level of output 18 000
Maximum factory output 25 000
(a) Define ‘public limited company’.
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(b) Calculate the margin of safety for CTF’s children’s beds. Show your working.
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(c) Outline two ways an increase in inflation might affect CTF.
Way 1: ...............................................................................................................................
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Way 2: ...............................................................................................................................
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© UCLES 2022 06_7115_11_2022_1.1

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(d) Explain two possible advantages to CTF of using batch production.
Advantage 1: ....................................................................................................................
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Explanation: ......................................................................................................................
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Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think manufacturing businesses should always respond to environmental pressures?
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© UCLES 2022 06_7115_11_2022_1.1 [Turn over

6
3 VCG manufactures high-quality briefcases and travel bags. VCG has 50 skilled production workers
in its factory. VCG is planning to expand by building a second factory. Different locations are being
considered. The Managing Director is reviewing VCG’s financial statements. An extract is shown
in Table 3.1. Both internal and external stakeholder groups of VCG are interested in this information.
Table 3.1
Extract from VCG’s 2021 financial statements ($)
Revenue 2 000 000
Shareholders’ equity (funds) 800 000
(a) Define ‘shareholders’ equity’.
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(b) Identify two financial statements a public limited company is legally required to publish each
year.
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(c) State whether each of the following are classified as a current asset or a current liability.
Overdraft: ..........................................................................................................................
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Trade receivables: ............................................................................................................
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Trade payables: ................................................................................................................
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Cash in bank: ....................................................................................................................
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(d) Explain one way each of the following stakeholder groups might use VCG’s accounts:
Shareholders: ...................................................................................................................
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Explanation: ......................................................................................................................
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Suppliers: ..........................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think access to labour is the most important factor for a manufacturing business to
consider when deciding where to locate a new factory? Justify your answer.
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© UCLES 2022 06_7115_11_2022_1.1 [Turn over

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4 MBH is a business organisation in the public sector. It controls 5 hospitals and has 5600 employees
including 440 doctors. External recruitment is used when recruiting skilled employees. The Human
Resources Director uses ideas from Herzberg’s theory to improve employee motivation. He is
worried about communication barriers within MBH. The business has a tall organisational structure
and a long chain of command. Most of MBH’s internal communication is by email and phone calls.
(a) Identify two objectives for a business organisation in the public sector.
Objective 1: .......................................................................................................................
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Objective 2: .......................................................................................................................
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(b) Define ‘chain of command’.
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(c) Outline two ways MBH can use ideas from Herzberg’s theory to motivate its employees.
Way 1: ...............................................................................................................................
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Way 2: ...............................................................................................................................
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© UCLES 2022 06_7115_11_2022_1.1

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(d) Explain how MBH might reduce or remove each of the following communication barriers:
Messages lost: ..................................................................................................................
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Explanation: ......................................................................................................................
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Use of jargon: ...................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think an organisation should always use external recruitment when recruiting skilled
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To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.
© UCLES 2022 06_7115_11_2022_1.1

Cambridge O Level

*7606784056*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
06_7115_12_2022_1.1
2
1 AHG is an established business as it has been operating for a long time. It sells garden products
including plants and flowers. AHG uses competitive pricing. The business has 4 managers and 30
other employees. All AHG’s managers use delegation. The Finance Manager is analysing AHG’s
statement of financial position as she is interested in its liquidity. An extract is shown in Table 1.1.
Table 1.1
Extract from AHG’s statement of financial position at 30 March 2022 ($000)
Current assets 660
(a) Define ‘current liabilities’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two examples of non-current assets.
Example 1: ........................................................................................................................
...........................................................................................................................................
Example 2: ........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible reasons why liquidity is important to AHG.
Reason 1: .........................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
Reason 2: .........................................................................................................................
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© UCLES 2022 06_7115_12_2022_1.1

3
(d) Explain two advantages to AHG of its managers using delegation.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think competitive pricing is the best method for an established business to use? Justify
your answer.
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© UCLES 2022 06_7115_12_2022_1.1 [Turn over

4
2 RWB manufactures buses.1200 people work in its factory. All employees receive off-the-job training.
RWB uses financial rewards to motivate its employees. Last year RWB made a $1.7 million loss.
The Managing Director said: ‘There are many external influences affecting our business, including
changes in the level of unemployment and new legal controls over business activities which affect
the environment.’
(a) Define ‘off-the-job training’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons (other than financial) why people work.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two methods of financial rewards RWB might use to motivate its employees.
Method 1: ..........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_7115_12_2022_1.1

5
(d) Explain two ways RWB might be affected by new legal controls over business activities which
affect the environment.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(e) Do you think a reduction in the level of unemployment always benefits businesses? Justify
your answer.
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© UCLES 2022 06_7115_12_2022_1.1 [Turn over

6
3 CHW manufactures electrical products including cameras. The business is developing new products.
The Managing Director knows that the stage of the product life cycle can influence CHW’s marketing
decisions about promotion. He is analysing data for one of its products. An extract is shown in
Table 3.1. The business would also like to introduce flow production into the factory.
Table 3.1
Extract from CHW’s data for one type of camera (2021)
Selling price per unit ($) 120
Fixed costs ($) 200 000
Margin of safety (units) 500
(a) Identify one benefit and one cost to a business of developing new products.
Benefit: .............................................................................................................................
...........................................................................................................................................
Cost: .................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the break-even level of output for 2021. Show your working.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways CHW could increase its margin of safety.
Way 1: ...............................................................................................................................
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Way 2: ...............................................................................................................................
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© UCLES 2022 06_7115_12_2022_1.1

7
(d) Explain two ways in which the stage of the product life cycle might affect CHW’s marketing
decisions about promotion.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think flow production is the best method of production for a manufacturing business
to use? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2022 06_7115_12_2022_1.1 [Turn over

8
4 Tom wants to leave his job to become an entrepreneur. He and his sister plan to start a window
cleaning business. Tom has been told that new businesses are at a greater risk of failure than
established businesses. Tom has to decide whether a partnership is a suitable form of business
organisation for the new business. He has calculated the business will need $700 as start-up capital.
Tom knows that every decision he makes will have an opportunity cost.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘opportunity cost’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify four reasons why a new business might be at greater risk of failure than an established
business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Reason 3: .........................................................................................................................
...........................................................................................................................................
Reason 4: .........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2022 06_7115_12_2022_1.1

9
(d) Explain two suitable sources of start-up capital Tom’s business might use.
Source 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Source 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a partnership is the best form of business organisation for a new business? Justify
your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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© UCLES 2022 06_7115_12_2022_1.1

10
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© UCLES 2022 06_7115_12_2022_1.1

11
BLANK PAGE
© UCLES 2022 06_7115_12_2022_1.1

12
BLANK PAGE
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.
© UCLES 2022 06_7115_12_2022_1.1

*1883565492*

1 hour 45 minutes

Total
DC (SM/LD) 32388
2
1 Leo owns a garage in the centre of a town located in country A. The garage has a lot of For
Examiner’s
stock of cars for sale. It also sells petrol and has a shop selling a wide range of food. ‘Petrol Use
is a loss-leader for my garage’ said Leo. ‘Most of my profit comes from selling cars and I am
looking for ways to increase the profits of the rest of my business.’
(a) What is meant by a loss leader?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two overhead costs that you think Leo’s garage would have to pay.
Overhead 1: ......................................................................................................................
Overhead 2: ................................................................................................................. [2]
(c) The Government in country A has raised interest rates. Explain the impact that this
increase might have on the profits of Leo’s garage.
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© UCLES 2010 7115/11/O/N/10

3
(d) Identify and explain three ways in which Leo could promote his business. For
Examiner’s
Use
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
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..........................................................................................................................................
Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
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..........................................................................................................................................
Way 3: ...............................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Although Leo’s business is profitable it has a cash flow problem. Recommend two
methods that Leo could use to help solve the problem. Justify your recommendations.
Method 1: ..........................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
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Method 2: ..........................................................................................................................
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..................................................................................................................................... [6]

4
2 Suki is the manager of a department in a large retail shop. Her job is varied and she is For
Examiner’s
responsible for the recruitment and motivation of the staff who work in her department. Suki Use
enjoys her job but sometimes finds it hard. ‘Finding the right staff is difficult and motivating
some of them is almost impossible!’ she said.
(a) Identify two examples of fringe benefits that shop workers are likely to receive.
Fringe benefit 1: ................................................................................................................
Fringe benefit 2: ........................................................................................................... [2]
(b) Identify two reasons why recruiting shop workers might be difficult.
Reason 1: .........................................................................................................................
..........................................................................................................................................
Reason 2: .........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why shop workers might lack motivation.
Reason 1: .........................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: .........................................................................................................................
Explanation: ......................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2010 7115/11/O/N/10

5
(d) Suki is also responsible for making sure that workers follow Health and Safety laws in For
Examiner’s
her department. Identify and explain three ways in which such laws might help protect Use
employees and customers.
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
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..........................................................................................................................................
Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
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..........................................................................................................................................
Way 3: ...............................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) The sales of the shop have fallen recently. The management think that costs must be
cut. Two suggestions have been made to do this:
• Make 50% of the shop workers redundant
• Reduce the hours of all shop workers by 50%.
Which one of these two options do you think the management should choose? Justify
your recommendation.
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6
3 Manfred is the Finance Director for a large public limited company called BTX. He sets the For
Examiner’s
financial budgets for all the departments. Manfred is worried about the falling sales of BTX. Use
He was looking at the data in Table 1.
Table 1: Selected Financial Data from BTX ($000’s)
2008 2009
Sales 1 200 11 00
Net Profit 200 250
Capital employed 1 000 1 500
Current Ratio 1.2 0.7
(a) What is meant by a financial budget?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Calculate the net profit margin for BTX in 2009.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Explain what the current ratio tells Manfred about BTX’s financial position.
..........................................................................................................................................
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© UCLES 2010 7115/11/O/N/10

7
(d) BTX wants to raise new funds in 2010 to help finance its growth plans. Identify and For
Examiner’s
explain three ways it could do this. Use
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
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Way 3: ...............................................................................................................................
Explanation: ......................................................................................................................
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8
4 Sweet Scent is a company that manufactures toiletries such as soap, sun cream and For
Examiner’s
toothpaste. Fig.1 and Fig. 2 show the product life cycles of two of its brands of face cream Use
coded W and X.
Sales Sales
Value $ Value $
Time Time
Fig. 1: Product W Fig. 2: Product X
(a) What is meant by a product life cycle?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify the four stages of the product life cycle of product X.
Stage 1: ............................................................................................................................
Stage 2: ............................................................................................................................
Stage 3: ............................................................................................................................
Stage 4: ....................................................................................................................... [2]
(c) Identify and explain two main differences in the life cycles of the two products shown in
Fig. 1 and Fig. 2.
Difference 1:......................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Difference 2:......................................................................................................................
Explanation: ......................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2010 7115/11/O/N/10

9
(d) Sweet Scent is soon to launch a new range of toothpaste called Gleam. For
Examiner’s
Use
Identify and explain three factors that the management of Sweet Scent should consider
before setting a price for Gleam.
Factor 1: ............................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ............................................................................................................................
Explanation: ......................................................................................................................
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Factor 3: ............................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) The management of Sweet Scent believe that the more the company spends on
advertising, the more profitable the product will be. Do you think they are right? Justify
your answer.
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10
5 ATC is a very large exporting company with many offices throughout the world. The top For
Examiner’s
management know that effective communication is vital in such a large business. Recently the Use
management held a meeting to consider the ways communication operates in the business.
Discussion focused on the ideas of one-way communication and communication feedback.
(a) What is meant by communication feedback?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two business situations in which one-way communication would be suitable.
Situation 1: ........................................................................................................................
..........................................................................................................................................
Situation 2: ........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which information technology has affected how a
business communicates with its stakeholders.
Way 1: ...............................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ...............................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2010 7115/11/O/N/10

11
(d) ATC employs 10 000 staff throughout the world. Identify and explain three benefits that For
Examiner’s
ATC might gain from delegating decision-making to its staff around the world. Use
Benefit 1:...........................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2:...........................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 3:...........................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) ATC has a policy of recruiting staff for the senior jobs from within the business. It is
changing its policy so that external recruitment will be used to recruit senior staff in the
future. Do you think that the change will benefit ATC? Justify your answer.
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© UCLES 2010 7115/11/O/N/10

12
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© UCLES 2010 7115/11/O/N/10

*5247513374*

1 hour 45 minutes

Total
DC (AC) 32690
2
1 Mike is a sole trader. He owns a shop selling fruit and vegetables. ‘I am always looking for For
ways of increasing my profits’ he said, ‘but it is hard to compete against big supermarket Examiner’s
shops. I have low profit margins on most of my goods so I cannot cut prices any more.’ Use
The business also has an overdraft with the bank.
(a) Identify two variable costs of Mike’s business.
Variable cost 1: ................................................................................................................
..........................................................................................................................................
Variable cost 2: ................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by a ‘low profit margin’?
..........................................................................................................................................
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..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages to Mike of using a bank overdraft.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 7115/12/O/N/10

3
(d) Identify and explain three methods that Mike could use to compete against larger For
competitors. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
(e) Do you think Mike should take on a business partner? Justify your answer.
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4
2 Imogen is a Human Resources manager in a chain of hotels. Recruiting and retaining For
employees is a major part of her job. ‘Recruiting staff is easy but keeping them is much harder’ Examiner’s
she said. The employees are paid a wage plus a bonus but wages are low. All employees are Use
given an employment contract when they join the company.
(a) Identify two items that are in an employment contract.
Item 1: ..............................................................................................................................
..........................................................................................................................................
Item 2: ..............................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by a ‘bonus’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible reasons why wage levels are low in this business.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 7115/12/O/N/10

5
(d) Other than paying higher wages, identify and explain three methods that Imogen could For
use to help keep staff. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that it is always important for a business to reduce the number of
employees leaving each year? Justify your answer.
..........................................................................................................................................
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...................................................................................................................................... [6]

6
3 Manfred is the Finance Director of a large public limited company BTX. After looking at the For
data in Table 1, Manfred was worried that BTX might be facing problems. Examiner’s
Use
Table 1: Selected Financial Data for BTX ($’000s)
2008 2009
Sales 1200 800

Net profit 200 100
Capital employed 1000 400
Dividends 150 20
The current ratio was 1.2 in 2008 and 1.5 in 2009.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Calculate the return on capital employed (ROCE) in 2009.
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Explain how ROCE can be used to assess the performance of a company.
..........................................................................................................................................
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...................................................................................................................................... [4]
© UCLES 2010 7115/12/O/N/10

7
(d) Identify and explain three ways by which the company can improve its net profits. For
Examiner’s
Way 1: .............................................................................................................................. Use
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [6]
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8
4 Gorgeous Chocs is a manufacturer of high quality chocolates. The company spends a lot of For
money on marketing but the management knows that it is important that such spending is Examiner’s
cost effective. The company accountant has just introduced new financial budgets for each Use
department.
(a) What is meant by ‘cost effective’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by a ‘financial budget’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two factors that Gorgeous Chocs needs to consider in designing
the packaging for its products.
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2010 7115/12/O/N/10

9
(d) Identify and explain three factors that Gorgeous Chocs should consider when For
advertising its products. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the prices charged by Gorgeous Chocs for its products are important
in determining the success of these products? Justify your answer.
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10
5 ATC is a large exporting company with many offices throughout the world. The senior For
managers know that effective communication is vital in such a large business. Recently the Examiner’s
management held a meeting to consider ways of improving communication in the business. Use
Discussion focused on the problems of one-way communication and the importance of
feedback.
(a) What is meant by ‘one-way communication’?
..........................................................................................................................................
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...................................................................................................................................... [2]
(b) Identify two benefits of the telephone as a means of communication.
Benefit 1: ..........................................................................................................................
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Benefit 2: ..........................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two benefits to the management of receiving feedback from
employees.
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2010 7115/12/O/N/10

11
(d) ATC invests heavily in new technology in its business. Identify and explain three For
benefits that ATC may gain from this investment in new technology. Examiner’s
Use
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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Benefit 3: ..........................................................................................................................
Explanation: .....................................................................................................................
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(e) As a large employer of people, ATC knows that it must follow all the laws that affect
people at work. Do you think that such laws benefit both ATC and its staff? Justify your
answer.
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© UCLES 2010 7115/12/O/N/10

12
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© UCLES 2010 7115/12/O/N/10

* 1 2 9 6 2 4 8 2 8 8 *

1 hour 45 minutes

Total
DC (NF/SW) 48884
2
1 Carlos was made redundant from his job in a factory. He used his redundancy money and For
some of his savings to start a new business. He bought a boat to give trips to tourists on Examiner’s
a river near his home. The boat cost him $150 000. Table 1 shows the revenue and cost Use
estimates that Carlos made.
Table 1
Revenue per boat trip $80

Variable cost per boat trip $30
Average number of boat trips per week 25
Weekly overhead costs [fixed costs] $500
Carlos wanted his business to give him job security and to give a return on his investment of
at least 20% each year. He estimates that annual profits will be $37 500.
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Identify two examples of overhead costs that Carlos might incur.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
..................................................................................................................................... [2]
(c) Using the information given in Table 1, draw a break-even chart for Carlos’ business.
$
2500
2000
1500
Revenue Weekly
& Costs Break-Even
1000 Chart
500
0
0 10 20 30
Number of boat trips per week
[4]
© UCLES 2011 7115/11/O/N/11
3
(d) Identify and explain three methods that Carlos could use to promote his new business. For
Examiner’s
Method 1: ......................................................................................................................... Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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(e) Carlos wanted his business to give him job security and a return on capital of at least
20%. Do you think that his business will help him achieve these objectives? Justify your
answer.
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4
2 Early Tots makes wooden toys for children. The business uses both primary and secondary For
market research data to decide what products to make. It has a wide range of toys but some Examiner’s
of the products are nearing the end of their product life cycle. The managers are thinking Use
about using extension strategies for these products.
(a) What is meant by the term ‘secondary market research’?
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..................................................................................................................................... [2]
(b) What is meant by the term ‘product life cycle’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(c) Identify and explain two methods that Early Tots could use to gather primary market
research data.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 7115/11/O/N/11

5
(d) Identify and explain three extension strategies that Early Tots could use. For
Examiner’s
Strategy 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
Strategy 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Strategy 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Consider the advantages and disadvantages of two channels of distribution that Early
Tots could use for a new range of wooden toys. Recommend which channel Early Tots
Channel 1: .......................................................................................................................
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Channel 2: .......................................................................................................................
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Recommendation: ............................................................................................................
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6
3 Crompton Springs, a private limited company, bottles mineral water. The production method For
is automated but inefficient, because the machinery used was bought 20 years ago. The Examiner’s
company uses unskilled and low paid workers to load and unload the production lines. The Use
managers have decided to invest in new machinery.
(a) What is meant by ‘production method is automated’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Identify two features of a private limited company.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two possible reasons why workers at Crompton Springs are low
paid.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2011 7115/11/O/N/11

7
(d) Identify and explain three problems that inefficiency can cause a business. For
Examiner’s
Problem 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that the employees at Crompton Springs will be happy with the managers’
decision to invest in new machinery? Justify your answer.
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8
4 XYZ is a large retail business with over 50 shops. The business is going to open a new shop For
and wants to recruit a manager. A job description for the new position of shop manager Examiner’s
has been produced. The directors are also looking at the methods they use to pay their Use
employees.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(b) Identify two suitable places to advertise the position of a new shop manager.
Place 1: ............................................................................................................................
..........................................................................................................................................
Place 2: ............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two advantages to XYZ of producing a job description for the
position of shop manager.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 7115/11/O/N/11

9
(d) Identify and explain three different payment methods that XYZ could use to reward their For
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that the appointment of a suitable shop manager will mean that the new
shop is certain to be successful? Justify your answer.
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10
5 Country W has a mixed economy. The public sector has grown in recent years. The For
Government has also introduced many new laws regulating business behaviour and Examiner’s
protecting employees and consumers. Use
(a) What is meant by the term ‘mixed economy’?
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two objectives often set by businesses in the public sector.
Objective 1: ......................................................................................................................
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Objective 2: ......................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why the size of the public sector might increase over
time.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 7115/11/O/N/11

11
(d) Identify and explain three ways in which consumers might benefit from consumer For
protection laws. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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(e) The management of many businesses in the private sector think that employment
legislation is making them less competitive. Do you agree? Justify your answer.
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© UCLES 2011 7115/11/O/N/11

12
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© UCLES 2011 7115/11/O/N/11

* 3 5 7 7 0 6 8 5 4 3 *

1 hour 45 minutes

Total
DC (NF/SW) 45648
2
1 Stilvan always wanted to run his own business. When he left school he borrowed money For
from his parents to start a gardening business. The business name is Stilvan Grass Cutters. Examiner’s
Stilvan bought some equipment to cut grass and trees. Stilvan delivers leaflets to people’s Use
homes to promote his business.
Table 1 shows data for a typical week for Stilvan’s business.
Table 1

Variable cost per job $7
Demand for his services is seasonal and this causes problems for Stilvan.
(a) Identify two objectives that Stilvan might have had when he set up his business.
Objective 1: ......................................................................................................................
..........................................................................................................................................
Objective 2: ......................................................................................................................
..................................................................................................................................... [2]
(b) Identify two advantages of using leaflets as a method of promotion.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..................................................................................................................................... [2]
(c) Using the information given in Table 1, draw a break-even chart for Stilvan’s business.
$
1000
750
Weekly
Revenue & Break-Even
Costs 500
Chart
250
0
0 20 40 60
[4]
© UCLES 2011 7115/12/O/N/11

3
(d) Identify and explain three problems that seasonal demand can cause for Stilvan’s For
business. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Stilvan wants to make his business more profitable. Recommend ways in which this
could be achieved. Justify your answer.
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4
2 Cycles4u make a wide range of bicycles. The business is ‘product orientated’ as it believes For
that good products will sell easily. The business does not use any market research to help in Examiner’s
decision making. However, Cycles4u does spend a lot of money on promoting its products to Use
the target markets.
(a) What is meant by the term ‘product orientated’?
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..................................................................................................................................... [2]
(b) What is meant by the term ‘target market’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(c) Identify and explain two possible disadvantages to a business of having a wide product
range.
Disadvantage 1: ...............................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
© UCLES 2011 7115/12/O/N/11

5
(d) Identify and explain three channels of distribution that Cycles4u could use to help launch For
a new range of bicycles. Examiner’s
Use
Channel 1: .......................................................................................................................
Explanation: .....................................................................................................................
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Channel 2: .......................................................................................................................
Explanation: .....................................................................................................................
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Channel 3: .......................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that Cycles4u should use market research in the future? Justify your
answer.
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6
3 Mayfair Solutions, a public limited company, develops software packages for customers. The For
staff it employs are highly paid, but Mayfair Solutions believes that this is money well spent. Examiner’s
The company has to keep updating its software packages because customer requirements Use
keep changing. The software market is very competitive.
(a) What is meant by the term ‘public limited company’?
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Identify two features of a very competitive market.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two possible reasons why the staff at Mayfair Solutions are paid
high wages.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 7115/12/O/N/11

7
(d) Identify and explain three problems that the need to keep updating its software packages For
may create for Mayfair Solutions. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Mayfair Solutions has recently received a takeover bid from a large rival software
company. Do you think that this takeover would benefit both employees and shareholders
of Mayfair Solutions? Justify your answer.
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8
4 Travelscene is a company that specialises in holiday tours for people with interests in sport. It For
arranges trips like ski holidays and group visits to major events such as the Olympic Games. Examiner’s
This is a niche market. Travelscene is a very profitable business. The company has an Use
excellent reputation as an efficient business. It employs experienced tour managers who look
after the needs of tourists during their trip. It currently has a vacancy for a tour manager.
(a) What is meant by the term ‘a niche market’?
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(b) What is meant by ‘an efficient business’?
..........................................................................................................................................
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(c) Identify and explain two qualities that a new Travelscene tour manager will need.
Quality 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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Quality 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 7115/12/O/N/11

9
(d) Identify and explain three possible reasons why Travelscene is a very profitable business. For
Examiner’s
Reason 1: ......................................................................................................................... Use
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) The management of Travelscene is thinking of starting a new range of family beach
holidays, aimed at the mass market. Do you think that this would be a good idea? Justify
your answer.
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10
5 The structure of the economy in country W has changed greatly in the last ten years. Primary For
sector activities have declined in importance, but a range of new tertiary sector businesses Examiner’s
have started up. Output in the secondary sector has increased, but employment in this sector Use
has fallen. These changes have caused social and economic problems, with many people
finding it difficult to get jobs. The wages of workers in the primary sector businesses have
been falling.
(a) What is meant by ‘primary sector activities’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two examples of businesses that would be classified as being in the tertiary
sector.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(c) Identify and explain two possible reasons why workers’ wages in primary sector
businesses are falling.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 7115/12/O/N/11

11
(d) Identify and explain three possible causes of the structural changes that have occurred For
in country W. Examiner’s
Use
Cause 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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Cause 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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Cause 3: ..........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that the Government should subsidise primary sector businesses to stop
them from closing? Justify your answer.
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© UCLES 2011 7115/12/O/N/11

12
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© UCLES 2011 7115/12/O/N/11

* 6 2 9 2 3 6 3 8 1 4 *

1 hour 45 minutes

Total
DC (NF) 62997
2
1 Durban Dragons is a big football club. Recently fewer people have been watching its matches For
and ticket revenue is falling. Some people say that ticket prices for matches are too high Examiner’s
and should be reduced. The club has high fixed costs and needs to improve its cash flow. Use
The club directors have been trying to gain sponsorship and a number of businesses are
very interested.
(a) What is meant by ‘cash flow’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Give two examples of fixed costs that a business like a football club would incur.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(c) Identify and explain two ways the cash flow of Durban Dragons could be improved.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
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Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/11/O/N/12

3
(d) Identify and explain two reasons why businesses might want to sponsor football clubs For
like Durban Dragons. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think if Durban Dragons reduce ticket prices for matches this will increase
revenue? Justify your answer.
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4
2 Gresham Textiles manufactures high quality clothing. Production is labour intensive. For
Managers are paid more than production line workers in the factory. The business is investing Examiner’s
in automated machinery. The management also wants to introduce lean production methods. Use
(a) What is meant by ‘labour intensive’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two suitable sources of finance that Gresham Textiles could use to finance the
investment in automated machinery.
Source 1: .........................................................................................................................
Source 2: .................................................................................................................... [2]
(c) Identify and explain two reasons why factory managers are paid more than production
line workers at Gresham Textiles.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/11/O/N/12

5
(d) Identify and explain two ways lean production methods could reduce costs in the factory. For
Examiner’s
Way 1: .............................................................................................................................. Use
Explanation: .....................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]
(e) Do you think that a change to automated methods of production would benefit
customers of Gresham Textiles? Justify your answer.
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..................................................................................................................................... [6]

6
3 Table 1 shows the Balance Sheet for company D at the end of 2010 and 2011. For
Examiner’s
Table 1: Company D Balance Sheet [$m] Use
2010 2011
Net Assets 650 700
Long-term Liabilities 350 350

The accounts also showed that the net profit of company D was $80m in 2010 and $120m
in 2011.
(a) What is meant by ‘capital employed’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Calculate company D’s current ratio in 2011.
..........................................................................................................................................
..................................................................................................................................... [2]
(c) The directors are planning further expansion of the company. Identify and explain two
benefits to company D of raising finance by selling more shares.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/11/O/N/12

7
(d) Identify and explain a reason why the following stakeholders would be interested in For
using company D’s accounts. Examiner’s
Use
Creditors’ reason: .............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Employees’ reason: ..........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Shareholders’ reason: ......................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think the performance of company D in 2011 has improved? Justify your
conclusion using the data provided.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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8
4 Jergen Cosmetics makes a range of beauty products for women in country A. ‘We are a For
market orientated company’ said Klaus, the Managing Director. ‘One of our business Examiner’s
objectives is to increase sales turnover. We have just set up our own website and increased Use
our marketing budget. Our country’s economic growth is forecast to be 4% next year and this
will guarantee our company’s profitability.’
(a) What is meant by ‘market orientated company’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) What is meant by ‘Managing Director’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two benefits to Jergen Cosmetics of setting business objectives.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2012 7115/11/O/N/12

9
(d) Identify and explain two benefits to Jergen Cosmetics of having its own website. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that economic growth in country A will lead to increased profitability for
Jergen Cosmetics? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
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10
5 Greenfield manufactures furniture. The company imports wood and other raw materials For
from several countries. Marcos is the Managing Director of Greenfield. Marcos said that his Examiner’s
company was affected by import quotas and changes in exchange rates. He said: ‘Greenfield Use
has to buy its raw materials from other countries as there are no timber (wood) resources in
our own country.’
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two ways that Greenfield’s business might harm the environment.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways in which changes in exchange rates could cause problems
for Greenfield.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
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11
(d) The Government in Greenfield’s country is introducing consumer protection laws. For
Identify and explain three ways in which Greenfield’s business could be affected by Examiner’s
these new laws. Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Greenfield’s management is thinking of expanding the business by taking over another
furniture manufacturer. Do you think this is a good idea for Greenfield? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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12
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© UCLES 2012 7115/11/O/N/12

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1 hour 45 minutes

Total
DC (CW/SW) 62440
2
1 Kruger Enterprises manufactures a range of electrical products such as washing machines. For
Its best-selling product is in the decline stage of its life cycle. The management uses cost plus Examiner’s
pricing and believes that the demand for the company’s products is price inelastic. Changes Use
in Kruger’s marketing mix are being considered. The company is researching the market and
plans to introduce some new products next year.
(a) Label on Fig. 1 the other two stages of the product life cycle.
I II III IV
Sales
Introduction Decline
Time
Fig. 1: Product life cycle

[2]
(b) What is meant by ‘cost plus pricing’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two possible advantages to Kruger Enterprises of researching the
market.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2012 7115/12/O/N/12

3
(d) Identify and explain three benefits to Kruger Enterprises of introducing new products. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think reducing the price of its washing machines will increase the sales turnover
of Kruger Enterprises? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [6]

4
2 Just4U manufactures motor car parts. The production methods are capital intensive. The For
management believes that the company benefits from economies of scale. However, Examiner’s
problems with the workers in the factory have led to poor quality production. Despite this, Use
the Managing Director believes that the company must continue to grow if it is to achieve its
objectives. The business is planning a takeover of a competitor.
(a) What is meant by ‘capital intensive’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two objectives that a business like Just4U might have.
Objective 1: ......................................................................................................................
..........................................................................................................................................
Objective 2: ......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two economies of scale from which Just4U could benefit.
Economy of scale 1: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Economy of scale 2: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2012 7115/12/O/N/12

5
(d) Identify and explain two problems that poor quality might create for Just4U. For
Examiner’s
Problem 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that a takeover of a competitor will benefit the shareholders of Just4U?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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6
3 Celtic Springs, a public limited company, is a water bottling business. Its shareholders have For
been unhappy with the performance of the business and are threatening to take action at Examiner’s
the next Annual General Meeting (AGM). Table 1 shows an extract from the company’s latest Use
Profit/Loss Account.
Table 1: Celtic Springs Profit/Loss Account 2011 ($m)
Sales revenue ?
Cost of sales 150
Gross profit ?
Overheads/expenses 70
Net profit 10
The accounts of the business also show that the capital employed by Celtic Springs was
$650m.
(a) Calculate gross profit and sales revenue in 2011.
Gross profit: .....................................................................................................................
Sales revenue: ............................................................................................................. [2]
(b) Identify two functions of an Annual General Meeting.
Function 1: .......................................................................................................................
..........................................................................................................................................
Function 2: .......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways Celtic Springs could reduce its cost of sales.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2012 7115/12/O/N/12

7
(d) Identify and explain three reasons why profit is important to a company such as Celtic For
Springs. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the shareholders of Celtic Springs are right to be unhappy with the
company’s performance? Justify your answer using the data provided.
..........................................................................................................................................
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...................................................................................................................................... [6]

8
4 Colour Rack manufactures paint in country Z. It sells its products to customers both nationally For
and internationally. Colour Rack uses a specialist transport company to deliver its products to Examiner’s
customers. The Colour Rack brand is well known. Many of its factory employees are unhappy Use
at work. They are well paid but lack motivation due to the repetitive nature of their work.
(a) Paint manufacturing is a secondary sector business activity. Identify two types of
business activity in the tertiary sector.
Type 1: .............................................................................................................................
Type 2: ......................................................................................................................... [2]
(b) Identify two problems Colour Rack could have when exporting its paint to customers in
other countries.
Problem 1: ........................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
...................................................................................................................................... [2]
(c) Explain how a manufacturing business adds value to its products.
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [4]
© UCLES 2012 7115/12/O/N/12

9
(d) Identify and explain three factors Colour Rack should consider in deciding which For
transport company to use to deliver its products. Examiner’s
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Recommend two strategies for improving the motivation of Colour Rack’s factory
employees. Justify your answer.
Strategy 1: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Strategy 2: ........................................................................................................................
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...................................................................................................................................... [6]

10
5 Country W has a mixed economy. Herio is a Government economist. He said: ‘Business For
activity in the private sector can lead to external costs, such as pollution. It can also Examiner’s
create external benefits. I believe that businesses that create external benefits should be Use
encouraged and those that create external costs should be closed down.’ Country W has low
economic growth and rising inflation.
(a) What is meant by ‘the private sector’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) What is meant by ‘rising inflation’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(c) Most businesses set objectives. Identify and explain two reasons why having objectives
may be important for a business.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [4]
© UCLES 2012 7115/12/O/N/12

11
(d) Identify three external benefits and explain how business activity can create each For
benefit. Examiner’s
Use
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
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Benefit 2: ..........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
.........................................................................................................................................
...................................................................................................................................... [6]
(e) Herio believes businesses that create external costs should be closed down. Do you
agree with him? Justify your answer.
..........................................................................................................................................
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© UCLES 2012 7115/12/O/N/12

12
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© UCLES 2012 7115/12/O/N/12

* 1 9 9 2 1 9 4 6 7 9 *

1 hour 45 minutes

DC (CW) 77145
2
1 Earnshaw is a company that buys raw materials and components in bulk. It uses them to For
manufacture furniture using flow production methods. Productivity in the factory is high. Examiner’s
Currently Earnshaw has high costs of holding stock. The Managing Director wants to Use
introduce lean production methods.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two advantages to Earnshaw of buying raw materials in bulk.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two features of flow production.
Feature 1:..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/11/O/N/13

3
(d) Identify and explain three benefits to Earnshaw of using lean production methods. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) ‘If Earnshaw is to grow in the future then its unit production costs must fall’.
..........................................................................................................................................
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4
2 Muammar sells boxes of spices to markets. Workers in Muammar’s business are paid on a For
piece rate basis. Table 1 gives financial details of the business in 2012. Examiner’s
Use
Table 1
Fixed costs per month $10 000

Employee wages $2 per box
Raw materials $3 per box
Marketing costs $1 per box
Selling price $8 per box
Sales per month [average] 9000 boxes
(a) Identify two examples of fixed costs for Muammar’s business.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(b) Identify two reasons why sales may vary from month to month.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Calculate the annual profit that Muammar made in 2012.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/11/O/N/13

5
(d) Identify and explain one advantage and one disadvantage to Muammar of using piece For
rate to pay his workers. Examiner’s
Use
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Muammar is planning to change the selling price of the boxes to $7 each. Do you think
this change would benefit the business? Justify your answer.
..........................................................................................................................................
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..................................................................................................................................... [6]

6
3 Yura is the Managing Director of a company that sells holidays. The company organises For
hotels, air flights and car hire for customers. For the first time, the company is going to do Examiner’s
some market research. Secondary sources will be used and a sample of customers will be Use
selected for primary research.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two advantages of using secondary sources.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two methods of sampling that the company could use.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/11/O/N/13

7
(d) Identify and explain two ways of segmenting the market for holidays that the company For
could use. Examiner’s
Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Yura believes that the price is the most important part of the marketing mix for holidays.
Do you think that he is correct? Justify your answer.
..........................................................................................................................................
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..................................................................................................................................... [6]

8
4 Table 2 gives data about the economy of country C. For

Examiner’s
Use
Table 2
National income
Year per person ($) Inflation (%) Unemployment (%)
2010 650 5 10
2011 640 3 12
2012 600 1.5 18
The economy of country C is in recession. The Government wants to create more jobs by
encouraging more businesses to start up. However some pressure groups are against this
because they think that more businesses will cause more external (social) costs.
(a) What is meant by ‘recession’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two possible reasons why national income per person has fallen between 2010
and 2012.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways that a Government could help new businesses to start up.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/11/O/N/13

9
(d) Identify and explain three external (social) costs that might be caused by an increase in For
the number of businesses in country C. Examiner’s
Use
Cost 1: .............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Cost 2: .............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Cost 3: .............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that new start-up businesses can be successful in country C? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [6]

10
5 Dmit is a partner in a small retail clothing business. The business has been successful, but it For
is finding it difficult to compete against larger retailers. The partners are thinking of converting Examiner’s
the partnership into a private limited company. Use
(a) Identify two features of a partnership.
Feature 1: .........................................................................................................................
..........................................................................................................................................
Feature 2: .........................................................................................................................
..................................................................................................................................... [2]
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why the business might be finding it difficult to compete
against larger retailers.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/11/O/N/13

11
(d) Identify and explain three methods of promotion that the partnership could use to For
increase sales. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Consider the advantages and disadvantages of converting the partnership into a private
limited company. Recommend whether the partners should do this. Justify your answer.
Advantages: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantages: ................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
© UCLES 2013 7115/11/O/N/13

12
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© UCLES 2013 7115/11/O/N/13

* 6 8 0 8 7 3 0 0 1 1 *

1 hour 45 minutes

DC (SLM) 79645/1
2
1 Protec makes components for use in computers. The company is located in country Y where For
workers’ wages are high. Table 1 gives data about Protec. Examiner’s
Use
Table 1
Number of employees Average weekly wage Total output per

$ week [units]
400 500 2400
(a) Calculate average labour productivity for Protec.
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two reasons why labour productivity is important for Protec.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways Protec could increase the productivity in its factory.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/12/O/N/13

3
(d) Identify and explain three reasons why wages are higher in some countries than others. For
Examiner’s
Reason 1: ........................................................................................................................ Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) The management of Protec is thinking of relocating the factory to a country where
wages are lower. Do you think that Protec would benefit from such a move? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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4
2 Party Pops is a business that sells products such as cakes and balloons for childrens’ birthday For
parties. The Marketing Director thinks that the demand for the company’s products is price Examiner’s
elastic. Party Pops advertises on television. The products are sold through the company’s Use
own retail shops. However, the Marketing Director is thinking of changing this to selling only
on the Internet.
(a) Identify two aims of advertising.
Aim 1: ...............................................................................................................................
..........................................................................................................................................
Aim 2: ...............................................................................................................................
..................................................................................................................................... [2]
(b) Identify two methods of pricing that Party Pops could use.
Method 1: .........................................................................................................................
Method 2: .................................................................................................................... [2]
(c) Identify and explain two reasons why the demand for the company’s products is likely to
be price elastic.
Reason 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/12/O/N/13

5
(d) Identify and explain two methods of promotion (other than advertising) that Party Pops For
could use to increase sales. Examiner’s
Use
Method 1: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think Party Pops should stop selling through shops and sell only on the Internet?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
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..........................................................................................................................................
..................................................................................................................................... [6]

6
3 Harry owns a pizza restaurant in a large city. Table 2 gives financial data for the business in For
2012. Examiner’s
Use
Table 2
Selling price per pizza $8

Variable costs per pizza $5
Weekly sales 1500 pizzas
(a) What is meant by ‘variable costs’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two examples of fixed costs for Harry’s business.
Example 1: .......................................................................................................................
Example 2: .................................................................................................................. [2]
(c) Calculate how much profit Harry’s business makes in one week.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/12/O/N/13

7
(d) Harry pays his workers piece rates. Identify and explain one advantage and one For
disadvantage to Harry of using this method of payment. Examiner’s
Use
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Harry is planning to reduce the price of his pizzas to $7 in order to increase sales. Do
you think that this change will benefit his business? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

8
4 Country A has a mix of private sector and public sector enterprises. Figures 1– 3 give some For
data about the two sectors. Examiner’s
Use
Fig. 1: Average hourly Fig. 2: Average hours Fig. 3: Number of

wage worked per week employees in public
sector
10 45 Private Sector 14
Public
millions
hours
Sector 12
8 40
$
Public
6 35 8
Private Sector
Sector
0 0 0
2000 2006 2012 2000 2006 2012 2000 2006 2012
(a) Identify two examples of public sector enterprises.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
..................................................................................................................................... [2]
(b) Identify two aims that public sector enterprises often have.
Aim 1: ...............................................................................................................................
..........................................................................................................................................
Aim 2: ...............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two reasons why profits are important to private sector businesses.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/12/O/N/13
9
(d) Consider each of the Figures 1–3. Identify and explain three changes that are shown by For
the data in Figures 1– 3. Examiner’s
Use
Change in Figure 1: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Change in Figure 2: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Change in Figure 3: .........................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that a large decrease in the number of employees in the public sector in
country A will benefit all workers? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]

10
5 K & P is a large group of shops selling televisions. The directors of K & P use an autocratic For
management style. Spans of control are narrow and communication is only one-way. Many Examiner’s
workers leave K & P each year and this is a problem for the business. The motivation of the Use
workforce is low as workers feel they are unimportant.
(a) What is meant by ‘autocratic management style’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) What is meant by ‘span of control’?
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two disadvantages of one-way communication for K & P’s
management team.
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
© UCLES 2013 7115/12/O/N/13

11
(d) Identify and explain three methods that K & P could use to improve worker motivation. For
Examiner’s
Method 1: ......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Should K & P try to reduce the number of workers leaving each year? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
© UCLES 2013 7115/12/O/N/13

12
BLANK PAGE
© UCLES 2013 7115/12/O/N/13

* 0 8 4 7 3 4 5 3 4 5 *

1 hour 45 minutes

DC (SLM) 98103
2
1 Lu is a sole trader. He manages a bakery shop making and selling bread and cakes. He employs
4 workers all of whom are paid on time rate. Lu wants to expand the business by buying a new
shop and using it as a café (restaurant). He also wants to make a wider range of cakes, such as
wedding and birthday cakes, for which he thinks there is a demand. At present the business sells
all of the bread and cakes it makes.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two methods Lu could use for paying employees (other than time rate).
Method 1: ..................................................................................................................................
Method 2: ..............................................................................................................................[2]
(c) Identify and explain two suitable sources of finance Lu could use to buy a new shop.
Source 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Source 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/11/O/N/14

3
(d) Identify and explain two methods of promotion that Lu could use for the new range of cakes.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that Lu’s business will be more profitable if he expands it by opening a café in a
new shop? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

4
2 Rakesh manages a car repair business in country Y. He buys cars that are damaged or have parts
missing. Rakesh adds value by repairing these cars until they look like new ones. He employs
5 workers to do the repairs. The business holds a large stock of car parts and Rakesh always pays
cash for these. However Rakesh’s sales are usually on credit.
Table 1: Some information for a typical trading week
Cars bought by Rakesh 6

Average cost of each car $2000
Average cost of parts used per car $500
Weekly wages per employee $1000
Average price per car sold $5000
Number of cars sold 6
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by ‘Rakesh adds value’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Calculate the weekly net profit of the business.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/11/O/N/14

5
(d) Identify and explain two reasons why the weekly net profit may not be the same as the weekly
net cash flow for Rakesh’s business.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Country Y’s economy is in a recession. Do you think that this will make Rakesh’s business
less successful? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]

6
3 Natural Care is a company that makes soap. The business always acts in an ethical way. It follows
fair trade principles by paying fair prices to its suppliers. It uses a cost plus pricing method when
selling its products. Table 2 gives data about the company’s sales of soap and its share of the
national market for soap.
Table 2
Natural Care Market share of
Year sales ($m) Natural Care (%)
2012 40 10
2014 44 7
The Marketing Director of Natural Care wants to introduce a new competitive pricing strategy to
help regain market share. She also wants the Board of Directors to think about changing its ethical
policy.
(a) Calculate the total market sales of soap in 2012.
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why Natural Care’s market share fell in 2014.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to Natural Care of acting in an ethical way by paying fair
prices to its suppliers.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/11/O/N/14

7
(d) Identify and explain two ways in which Natural Care might be affected by changing to a
competitive pricing strategy.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that customers of products such as soap always benefit from an increase in
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

8
4 Genel manufactures clothes. The company uses an autocratic style of management. It employs a
large number of workers and pays low wages. Many employees leave the company each year but
they are easily replaced. Working conditions in the factories are poor. Health and safety is ignored
and long hours are worked. Employee motivation is low and employee productivity is falling.
(a) What is meant by an ‘autocratic style of management’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why Genel ignores health and safety in its factory.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two ways in which Genel would benefit from a more motivated workforce.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/11/O/N/14

9
(d) Identify and explain two ways that Genel could use to improve employee productivity in its
factories.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think Governments should introduce laws to protect employees’ interests in businesses
such as Genel? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

10
5 Zalpha is a multinational company. It manufactures agricultural machinery and employs a large

number of people. Figure 1 shows a simplified organisation chart for the business. The business
decision making is centralised and some employees complain of poor communications within the
company.
Figure 1
Board of Directors
Managing Director Managing Director Managing Director

Asia Division Europe Division Africa Division
Factory A manager Factory B manager
Quality Warehouse Stock control

manager manager manager
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Using only the information in Figure 1:
(i) Identify the span of control of the Managing Director of the Asia division.
.......................................................................................................................................[1]
(ii) How many levels are there in the chain of command?
.......................................................................................................................................[1]
(c) Identify and explain two possible reasons why Zalpha has poor internal communications.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/11/O/N/14
11
(d) Identify and explain two advantages to Zalpha of using centralised decision making.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that multinational companies such as Zalpha benefit the countries in which they
operate? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
© UCLES 2014 7115/11/O/N/14

12
BLANK PAGE
© UCLES 2014 7115/11/O/N/14

* 5 9 1 9 5 2 6 7 6 9 *

1 hour 45 minutes

DC (SLM) 98104
2
1 Abdula manages a business partnership that makes sports clothing. The business is working at
full capacity. It employs 12 people who are paid on a piece rate basis. The partners have an
objective to increase profits by 10 % each year for the next 5 years. They are thinking about a joint
venture with another manufacturer of sports clothing as one way of achieving this objective.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two ways of paying workers that the partnership could use (other than by piece rates).
Way 1: .......................................................................................................................................
Way 2: ...................................................................................................................................[2]
(c) Identify and explain two advantages to this business of setting objectives.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/12/O/N/14

3
(d) Identify and explain two advantages to the partnership of a joint venture with another
manufacturer of sports clothing.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Explain two ways (apart from a joint venture) that the partnership could use to achieve its
objective of a 10 % annual increase in its profit over the next 5 years. Recommend which way
is most likely to be successful. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

4
2 Sarah is the owner of a small business making children’s toys. She sells her toys to retailers on
3 months’ credit. She receives 1 month’s credit from her suppliers. Her cash flow forecast for the
start of 2015 is given below.
Table 1 ($000)

Cash outflows:
Purchases of stock 12 10 14
Wages X 7 6
Other payments 4 4 4
Total cash outflows 22 Y 24
Net cash flow (7) (1) (5)
Closing balance 3 2 (3)
(a) Calculate the following:
Wages in January (X): ..............................................................................................................
...................................................................................................................................................
Total cash outflows in February (Y): ..........................................................................................
...............................................................................................................................................[2]
(b) Identify two examples of Sarah’s ‘other payments’.
Example 1: ................................................................................................................................
Example 2: ............................................................................................................................[2]
(c) Identify and explain two reasons why the business has a negative closing balance in March.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/12/O/N/14

5
(d) Identify and explain two advantages to Sarah’s business of producing a cash flow forecast.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Sarah’s accountant told her that a positive cash flow is more important to the business than
profits. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]

6
3 Rhiannon Enterprises manufactures ladies clothes. Its best selling products are fashion jeans and
T-shirts. Figure 1 shows sales data for these products. In 2014 the value of the sales of these 2
main products was 50 % of the total sales of the business. The market for ladies’ clothes is very
competitive. In 2013 the business reduced the price of its jeans by 25 %. It is now trying to find
low cost suppliers of cloth to increase its profit margins. Sales of some other products have been
falling despite Rhiannon Enterprises increasing advertising spending on them.
Figure 1
Value of Sales $000

Jeans
175
T-shirts
125
2012 2013 2014
(a) What is meant by a market being ‘very competitive’?
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Calculate the total value of sales of Rhiannon Enterprises in 2014.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible reasons why Rhiannon’s sales of some other products fell
despite an increase in advertising.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 7115/12/O/N/14
7
(d) Identify and explain two factors that the business should consider before deciding on a new
supplier of cloth.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think Rhiannon Enterprises should reduce the prices of all its products in 2015?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
4 Grenada makes meat products such as pies, burgers and ready-made meals. It employs 10 000
workers. It operates in many countries, each with different laws and traditions. Its organisation
structure is tall and hierarchical. Spans of control are narrow and there is little delegation. Some
middle managers complain that they are not allowed to make important decisions. The directors
want to improve communication with employees.
Figure 2: Organisational structure of Grenada
Board of directors
Senior management
Middle management
Lower management
Other employees
(a) Identify two features of a ‘tall and hierarchical’ organisation structure.
Feature 1: ..................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
...............................................................................................................................................[2]
(b) Use Figure 2 to explain what is meant by ‘chain of command’.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two appropriate ways that the directors of Grenada can use to
communicate with employees.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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9
(d) Identify and explain two disadvantages to Grenada of operating in a number of different
countries.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that Grenada would benefit from greater delegation in its decision making?
...................................................................................................................................................
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...................................................................................................................................................
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10
5 Ali has just been appointed as Managing Director of Anypart, a large manufacturing business.
He told Anypart’s Board of Directors: ‘Behaving ethically will always lead to lower profits. I want
our employees to work longer hours, have fewer holidays and become more productive. This will
reduce costs of each unit of output and will benefit all our stakeholders’. Not all of the directors
agreed with him.
(a) What is meant by a ‘Board of Directors’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two of Anypart’s stakeholder groups (other than employees).
(c) Identify and explain two benefits to Anypart of reducing costs of each unit of output.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
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(d) Identify and explain two possible ways of improving productivity in Anypart’s business.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that ‘behaving ethically will always lead to lower profits’? Justify your answer.
...................................................................................................................................................
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* 1 6 5 0 8 0 1 1 4 6 *

1 hour 30 minutes

DC (KN) 114433
2
1 TWH makes a range of toys using batch production. TWH’s Managing Director, Dylan, plans to
invest in new technology to reduce average costs. ‘It’s the only way to increase efficiency as I do
not know how we can improve employees’ motivation’ he said. Dylan cannot decide on whether it
would be better to use retained profits or a long term loan as the source of finance.
Table 1: Data for 2014
Number of toys made per week 260 000

Average wage per hour paid by TWH $6
Average wage per hour paid by similar businesses $6.50
(a) What is meant by ‘average cost’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible advantages to TWH of using batch production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
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3
(d) Identify and explain two ways that TWH could improve the motivation of its employees.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) TWH can either use retained profit or a long term loan to finance the purchase of new
technology. Which option do you recommend TWH should use? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]

4
2 Ramford is a private limited company. It has four factories which make a wide range of food
products including breakfast cereal and ice cream. The Finance Director is worried about the
company’s financial performance. She has read that many businesses failed in the last year. ‘I
think we are suffering from diseconomies of scale’ she said. Ramford’s directors have decided to
cut the number of different products it makes from 80 to 10.
2013 2014
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two causes of business failure.
Cause 1: ....................................................................................................................................
...................................................................................................................................................
Cause 2: ....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two diseconomies of scale that Ramford might be experiencing.
Diseconomy 1: ...........................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Diseconomy 2: ...........................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
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5
(d) Identify and explain two factors that Ramford should consider when deciding which products
to remove from its product range.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Finance Director is right to be worried about the financial performance of
Ramford in 2014? Justify your answer using the data in Table 2 and appropriate ratios.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

6
3 Grimshaw manufactures mobile (cell) phones for the mass market. Last year its market share
increased by 3%. The Managing Director is planning to set up a new factory in country T to supply
the mobile phone market in that country for the first time. Grimshaw plans to sell a new model of
mobile phone. The Managing Director has asked for market research to be done. He said: ‘As a
multinational, we can set up a new factory anywhere; I want to know whether the Government of
country T will offer us any help to build our factory there.’
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by ‘market share’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages of market research to Grimshaw.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2015 7115/11/O/N/15

7
(d) Identify and explain two advantages to Grimshaw of developing new products.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Government of country T should help businesses such as Grimshaw set up
in its country? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]

8
4 Tebo has recently been made redundant from his job as a car mechanic. He is thinking of setting
up his own business. Even though he has no management experience, he knows that managing
cash flow will be important to the success of the business. Tebo is considering whether to apply for
a FIXIT franchise. This franchise would cost $15 000, which would use all of his savings. FIXIT is a
car repair franchise, with 36 franchisees.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two functions of management that Tebo might have to perform.
Function 1: .................................................................................................................................
...................................................................................................................................................
Function 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Explain why managing cash flow will be important for Tebo’s business.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
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9
(d) Identify and explain two factors Tebo should consider when deciding where to locate his
business.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that buying a FIXIT franchise is the best way for Tebo to start his business?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]
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* 1 9 2 1 0 0 9 3 2 2 *

1 hour 30 minutes

DC (GB) 116610
2
1 Walt owns a company which has developed a new computer game for adults. A focus group report
shows customers like it. Walt has been considering the marketing mix, including the packaging
for this product which is likely to be sold in many countries. ‘I don’t want to use a wholesaler as it
would affect my profit margin’ he said.
(a) What is meant by a ‘focus group’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two reasons why packaging might be important for the new computer game.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...............................................................................................................................................[2]
(c) Explain why the profit margin might be important for Walt’s business.
...................................................................................................................................................
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3
(d) Identify and explain two advantages to Walt if he decided to use a wholesaler to distribute his
products.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Consider two possible methods of promotion that Walt could use for the new game.
Recommend which method he should use. Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]

4
2 CLW makes wood furniture, including chairs and tables. Demand has risen quickly over the past
3 years and the business needs to increase the scale of production at its factory. The factory is
located near the city centre in an area of low unemployment. The Finance Director has produced a
business plan, including a balance sheet. The Finance Director is pleased with CLW’s liquidity.
Table 1: Extract of financial information
2013 2014
Non-current (fixed) assets ($m) 240 260
Current assets:
Inventory (stock) ($m) 180 330
Trade receivables (debtors) ($m) 320 240
Cash ($m) 100 90
Total current assets ($m) 600 660
Current Liabilities ($m) 480 440
Current ratio 1.25:1 ?
Acid test ratio 0.875:1 ?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) What is meant by a ‘balance sheet’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible benefits for CLW of holding high inventory (stock) levels.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2015 7115/12/O/N/15

5
(d) Identify and explain two factors (other than finance) that CLW’s management need to consider
when increasing the scale of production.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Finance Director is right to be pleased with the liquidity of CLW in 2014?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]

6
3 NCE manufactures cars in 4 factories using flow production. NCE’s Human Resources Director
thinks good induction training helps achieve high productivity. Factory X is its most efficient factory.
Last year the size of the new car market fell by 20%. NCE now has to make 400 workers redundant
at one of its other factories. ‘I am pleased NCE is a large business’, said the HR Director, ‘I think a
small business cannot survive in this competitive market.’
Table 2: NCE operations data for 2014
Number of cars made Number of employees

168 000 2800
(a) What is meant by ‘flow production’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Calculate the output per employee in 2014.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two ways in which induction training might benefit NCE.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2015 7115/12/O/N/15

7
(d) Identify and explain two factors that NCE would need to consider in deciding which workers
to make redundant.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The HR Director thinks that ‘a small business cannot survive in this competitive market’.
Do you agree with this view? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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8
4 Nellis is a public limited company. It specialises in building large luxury houses. Over the past
3 years its profits have increased as the country is experiencing an economic boom. ‘It’s not all
good news – the Government has announced plans to increase interest rates and introduce new
legal controls to protect the environment’ said the Managing Director. He believes these new legal
controls to protect the environment will only make businesses (such as Nellis) less profitable.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two stages (other than boom) of the business cycle.
Stage 1: .....................................................................................................................................
Stage 2: .................................................................................................................................[2]
(c) Explain how a rise in interest rates might affect Nellis.
...................................................................................................................................................
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(d) Identify two stakeholder groups. Explain why each group is important to this business.
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The Managing Director believes that the new legal controls to protect the environment will
only make businesses (such as Nellis) less profitable. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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*3665260283*

1 hour 30 minutes


11_7115_11_2016_1.2
2
1 C&C has a good reputation for making high quality, hand-made shoes. It has 120 full-time skilled
employees. C&C needs to recruit another 20 production employees to meet increased demand.
The Managing Director said: ‘I don't know why people worry about globalisation. Two years ago
we did not export, now exports are 10% of our output and increasing.’ C&C has orders for 100 000
pairs of shoes in 2017. The Managing Director cannot decide whether to introduce new technology
into the production process.
(a) What is meant by ‘globalisation’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible threats to C&C from globalisation.
Threat 1:............................................................................................................................
...........................................................................................................................................
Threat 2:............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two suitable ways in which C&C might advertise the job vacancies.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 11_7115_11_2016_1.2

3
(d) Identify and explain two benefits to C&C of having full-time employees.
Benefit 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think C&C should introduce new technology into the production process? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2016 11_7115_11_2016_1.2 [Turn over

4
2 Dowson is a large business which owns a number of shops. It sells a range of electrical goods such
as computers and televisions. The Finance Director has been looking at some recent financial data,
as shown in Table 1. He is pleased with Dowson's liquidity but knows he must reduce its high level
of debt including an overdraft of $6m. He said: 'The economy is in recession. Many small retailers
have failed. Size is an advantage!’
Table 1: Extract of financial data for Dowson
2015 2016
Revenue $280m $300m
Profit $175m $180m
Current ratio 1.2:1 1.5:1
Acid test ratio 0.8:1 0.5:1
Return on capital employed 10% 10%
(a) What is meant by ‘Return on capital employed’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by a ‘recession’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which the size of the business may benefit Dowson.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 11_7115_11_2016_1.2

5
(d) Identify and explain two problems for Dowson of having a high level of debt.
Problem 1:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the Finance Director is right to be pleased with the liquidity of the business?
Justify your answer using the ratio results in Table 1.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2016 11_7115_11_2016_1.2 [Turn over

6
3 YOGO is a new business which Amelia has just set up using Government support. YOGO makes
a range of sweets (candy) targeted at adults. It is a niche market. Amelia has been looking at the
marketing part of her business plan. She has to decide which pricing method to use. Amelia is
spending a lot of money on packaging. She did not do any primary market research as she thinks
she can use secondary data to make decisions. She believes that all adults like sweets.
(a) Identify two reasons why a Government might support business start-ups.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two parts (other than marketing) of a business plan.
Part 1:................................................................................................................................
...........................................................................................................................................
Part 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible pricing methods that Amelia might use.
Method 1: ..........................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2:...........................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 11_7115_11_2016_1.2

7
(d) Identify and explain two reasons why packaging is important for YOGO’s products.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Amelia’s business would benefit from primary market research? Justify your
answer.
...........................................................................................................................................
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© UCLES 2016 11_7115_11_2016_1.2 [Turn over

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4 DCP makes a range of high quality industrial paints. It sells direct to 6 large business customers
which are located in different countries. DCP charges a price of $0.35 per litre. It operates in a
competitive market. The Operations manager has been looking at DCP's costs as shown in Table 2.
He wants to increase profit but he does not want to buy cheaper materials.
Table 2: Output and cost information for DCP per week
Output (litres) 1 500 000

Total fixed costs ($) 350 000
Total material costs ($) 60 000
Total labour costs ($) 40 000
(a) Identify two functions of management.
Function 1:.........................................................................................................................
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Function 2:.........................................................................................................................
........................................................................................................................................... [2]
(b) Calculate DCP's average cost per litre.
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(c) Identify and explain two ways in which DCP might communicate with its customers.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two possible reasons why quality is important to DCP.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think that charging a higher price is the best way for DCP to increase profit? Justify
your answer.
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*9256393365*

1 hour 30 minutes


11_7115_12_2016_1.3
2
1 APQ is a multinational company. It makes chemicals that are sold to farmers which help increase
the amount of food produced. It plans to open a factory in country X, a developing country with low
interest rates. The Finance Director said: ‘This factory will create many external benefits. APQ is
a public limited company which tries to act in an ethical way with all its stakeholder groups.' The
new factory will cost $100m and there will be an opportunity cost for APQ. The Finance Director
cannot decide which source of finance to use for the new factory.
(a) What is meant by ‘opportunity cost’?
...........................................................................................................................................
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(b) Identify two possible external benefits that might result from the new factory.
Benefit 1:...........................................................................................................................
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Benefit 2:...........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to APQ of being a multinational company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2016 11_7115_12_2016_1.3

3
(d) Identify two stakeholder groups of APQ. Explain how APQ could act in an ethical way with
each stakeholder group.
Explanation:.......................................................................................................................
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Explanation:.......................................................................................................................
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(e) Explain two suitable sources of finance that APQ could use for the new factory. Recommend
which source of finance APQ should use. Justify your answer.
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© UCLES 2016 11_7115_12_2016_1.3 [Turn over

4
2 $LAND sells a wide range of products from food to toys. It has 400 shops in country B. $LAND's
marketing strategy is based on penetration pricing. $LAND does no advertising and buys all its
products directly from manufacturers. Revenue and profit have increased despite the country being
in recession. The Marketing Director wants to expand the business by opening shops in other
countries. He believes $LAND will be successful in other countries.
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) What is meant by ‘penetration pricing’?
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........................................................................................................................................... [2]
(c) Identify and explain two possible advantages to $LAND of advertising.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2016 11_7115_12_2016_1.3

5
(d) Identify and explain one advantage and one disadvantage to $LAND of buying direct from
manufacturers.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think that $LAND will be successful in other countries? Justify your answer.
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© UCLES 2016 11_7115_12_2016_1.3 [Turn over

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3 TKF makes furniture such as beds and tables using job production. TKF has 3 part-time office
employees, 8 production workers and 1 manager who is expected to carry out quality control. As
the factory is busy, most communication is by email. After a number of customer complaints, the
manager thinks TKF has some communication barriers. He believes good internal communication
can help TKF be more efficient. The manager is also worried about TKF’s cash flow position.
Table 1: Cash flow forecast for TKF ($000)
December January February
Cash in 35 20 29
Cash out 29 25 26
Net cash flow 6 (5) 3
Opening balance (3) 3 (2)
Closing balance 3 (2) 1
Figures in brackets are negative.
(a) What is meant by ‘job production’?
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© UCLES 2016 11_7115_12_2016_1.3

7
(c) Identify and explain two possible communication barriers for TKF.
Barrier 1:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Barrier 2:............................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two ways in which good internal communication can help TKF be more
efficient.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2016 11_7115_12_2016_1.3 [Turn over

8
(e) Do you think the manager is right to be worried about TKF’s cash flow position? Justify your
answer.
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4 Moeen and Ali plan to start up a small luxury hotel in the centre of a city in country R. They have
a budget of $30 000 to pay for all costs. After researching different types of business organisation,
as shown in Table 2, Moeen thinks the hotel should be a private limited company. If the business
is to be successful, Ali knows choosing the right location will be important. He cannot decide whether
to recruit full-time or part-time employees.
Table 2: Private sector business organisations in country R (millions)
Sole trader 3.0

Partnership 0.5
Private limited company 1.2
Other types of business organisation 0.3
Way 1:................................................................................................................................
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Way 2:................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the percentage (%) of businesses in country R which are partnerships.
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(c) Identify and explain two advantages to Moeen and Ali of forming a private limited company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2016 11_7115_12_2016_1.3

11
(d) Identify and explain two factors that might influence Ali’s choice of location for the business.
Factor 1:............................................................................................................................
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Explanation:.......................................................................................................................
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Factor 2:............................................................................................................................
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Explanation:.......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think it would be better for the business to use full-time or part-time employees? Justify
your answer.
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*6880054433*

1 hour 30 minutes


11_7115_11_2017_1.2
2
1 Ella has just left college and wants to start up her own business. She has designed a new bicycle
light with a safety feature not found in any rival products. Ella knows obtaining finance will be difficult.
She plans to have the lights produced in another country. Each light will cost $8 to produce. Ella
cannot decide whether to use price skimming. She said: ‘I have received orders for 300 lights and
I have not even started promoting them’. Ella wants to be a successful entrepreneur.
Table 1: Information on possible promotion options for Ella’s bicycle light.
Option 1: Set up her own website Option 2: Advertise in specialist

magazine
Cost information $500 for web page to show product $300 for full page colour
specifications and contact details advertisement
Other information For extra $750 website would allow One of the most popular cycling
customers to order online magazines in the country.
(a) Identify two characteristics of a successful entrepreneur.
Characteristic 1:.................................................................................................................
...........................................................................................................................................
Characteristic 2:.................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons why Ella plans to produce the lights in another country.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why obtaining finance might be difficult for Ella’s business.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2017 11_7115_11_2017_1.2

3
(d) Identify and explain one advantage and one disadvantage to Ella of using price skimming.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Recommend which promotion option Ella should choose. Justify your answer using the
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© UCLES 2017 11_7115_11_2017_1.2 [Turn over

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2 NMBJ makes a range of cookies (biscuits) using batch production. Last year profit increased by
$1.5 million. The directors think this is because of an increase in productivity and better management
of working capital. NMBJ has a low level of inventory. NMBJ plans to increase the wages of all 300
employees by $50 per month from March. The Finance Director is worried: ‘This decision will add
$15 000 to wages each month. Many employees are leaving. Is paying higher wages the best way
to improve motivation?’
Table 2: Cash flow forecast for the period January - March 2018 ($ 000)
Cash outflows:
Wages 60 60 X
Other costs 500 480 520
Opening balance 5 W (15)
Closing balance 5 (15) Z
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(b) Identify two reasons why a business might need working capital.
Reason 1:..........................................................................................................................
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Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Calculate the following values shown on the cash flow forecast.
W : ......................................................................................................................................
X : .......................................................................................................................................
Y : .......................................................................................................................................
Z : ....................................................................................................................................... [4]
© UCLES 2017 11_7115_11_2017_1.2

5
(d) Identify and explain one advantage and one disadvantage to NMBJ of having a low level of
inventory.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think paying higher wages is the best way for NMBJ to improve employee motivation?
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© UCLES 2017 11_7115_11_2017_1.2 [Turn over

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3 GDC is a transport delivery business in country Z. It operates in a competitive market. GDC has
5000 employees and 1000 delivery vehicles. GDC’s organisational structure has many levels of
hierarchy with a long chain of command. The managers use an autocratic leadership style. Last
year GDC delivered 2 billion parcels for businesses. The Managing Director said: ‘Having a good
reputation is important. We have also benefited from economies of scale’. GDC wants to expand
its operations to another country, but cannot decide the best way to do this.
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(b) What is meant by ‘autocratic leadership style’?
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(c) Identify and explain one advantage and one disadvantage of GDC’s organisational structure.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2017 11_7115_11_2017_1.2

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(d) Identify and explain two reasons why a good reputation might be important to GDC.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Recommend the most suitable way for GDC to expand its business to another country. Justify
your answer.
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© UCLES 2017 11_7115_11_2017_1.2 [Turn over

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4 CHONS is a public limited company. The directors want to open a new coal mine. All the coal will
be exported. The Managing Director is hopeful that the Government will allow the coal mine to be
opened. She said: ‘CHONS always meets legal controls. In an area of high unemployment surely
creating jobs is more important than protecting the environment. Most stakeholder groups including
shareholders and suppliers are happy. CHONS will not be asking for any Government support.’
Table 3: Information about the proposed coal mine
Planned output 50m tonnes per year
Number of years coal mine will operate 60 years
Jobs created 10 000
Level of waste products causing pollution High
Risk of traffic problems High
...........................................................................................................................................
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(b) Identify two ways (other than legal controls) that a government might use to influence business
decisions.
Way 1:................................................................................................................................
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Way 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage of CHONS being a public limited
company.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two ways in which legal controls might affect CHONS.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think the Government should allow CHONS to open the coal mine? Justify your answer
using the information in Table 3.
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© UCLES 2017 11_7115_11_2017_1.2


*5509364994*

1 hour 30 minutes


11_7115_12_2017_1.3
2
1 FlyAway is an airline business. It is in the tertiary sector. It offers low-price flights for business
customers in country J. Customers have to pay extra for luggage and food on the flight. It is a very
competitive market. The Marketing manager knows that improving customer service is important.
Bookings and advertising are done through FlyAway’s ticket shops and its website. The Marketing
manager cannot decide whether to close its ticket shops and use only e-commerce.
Table 1: Selected information about two of FlyAway’s routes
Route Average number of Average price per ticket Break-even number of

passengers per flight ($) passengers per flight
1 85 80 70
2 110 60 90
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(b) Calculate the revenue gained from an average flight on route 2.
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(c) Identify and explain two ways in which break-even information could help FlyAway.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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© UCLES 2017 11_7115_12_2017_1.3

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(d) Identify and explain two ways in which FlyAway could improve customer service.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think FlyAway should use only e-commerce? Justify your answer.
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© UCLES 2017 11_7115_12_2017_1.3 [Turn over

4
2 CGM makes high quality shoes using job production. The production method makes use of
specialisation. CGM operates in a niche market. CGM managers know that all business activity
creates external costs, so they always try to act in ways that protect the environment. The Operations
Director wants to increase profit. CGM could either buy cheaper raw materials or introduce new
technology into the production process. The new technology would cost $30 000 and could reduce
the number of employees from 30 to 26.
(a) Identify two advantages of specialisation.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘external cost’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Identify and explain two ways in which CGM could try to protect the environment.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_7115_12_2017_1.3

5
(d) Identify and explain one advantage and one disadvantage to CGM of using job production.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think CGM should introduce new technology into the production process? Justify your
answer.
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© UCLES 2017 11_7115_12_2017_1.3 [Turn over

6
3 Yanis owns a busy restaurant in the city centre. He employs 4 skilled chefs and 6 workers to serve
in the restaurant. All employees are on part-time contracts. The chefs are paid a high hourly wage
rate, but receive no bonuses. Yanis is worried that too many chefs leave. He is thinking of other
ways in which he could motivate the chefs. Yanis wants to open another restaurant but is worried
about problems linked to growth. He has prepared a balance sheet as part of his business plan.
An extract is shown in Table 2. The current ratio was 1.2:1 in 2016.
Table 2: Extract from balance sheet as at 30 September 2017 ($ 000)
Current assets 60
(a) Identify two main parts (other than finance) of a business plan.
Part 1:................................................................................................................................
Part 2:................................................................................................................................ [2]
(b) What is meant by ‘non-current assets’?
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(c) (i) Calculate the current ratio as at 30 September 2017.
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(ii) Explain what the two current ratio results show about Yanis’s business.
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................................................................................................................................ [2]
© UCLES 2017 11_7115_12_2017_1.3

7
(d) Identify two possible problems for Yanis if he expands his business. Explain what he might
do to overcome each problem.
Problem 1:.........................................................................................................................
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Problem 2:.........................................................................................................................
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(e) Do you think Yanis should change the way he motivates his chefs? Justify your answer.
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© UCLES 2017 11_7115_12_2017_1.3 [Turn over

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4 VIS provides a range of insurance services including insurance for cars and electrical products.
Last year retained profit decreased. The Managing Director blames higher taxation and also thinks
that some markets have become more competitive. Customer complaints have also increased.
The Managing Director plans to change the business organisational structure by removing both
the regional directors and regional managers. She said: ‘Shorter chains of command may help. I
know some employees may need training.' She cannot decide on a suitable method of
communication to inform employees about the changes to the organisational structure.
(a) Identify two reasons why markets can become more competitive.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two methods of training that a business might use.
Method 1:...........................................................................................................................
Method 2:........................................................................................................................... [2]
(c) Identify and explain two ways in which higher taxation might affect VIS.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2017 11_7115_12_2017_1.3

9
(d) Identify and explain two advantages to VIS of changing its organisational structure.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend the best method of communication VIS should use to inform employees about
the changes to its organisational structure. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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*1009226162*

1 hour 30 minutes


11_7115_11_2018_1.1
2
1 SOLS makes 5 styles of luxury shoes for men, using job production. SOLS operates in a niche
market. Quality assurance is important. All materials, including leather, are imported. SOLS uses
cost plus pricing. The shoes are sold directly to customers through its website. The Managing
Director said: ‘We can sell our shoes for $100 less a pair than our competitors because we have
no shops.’ Demand is increasing and the Managing Director has to decide whether to change to
batch production.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to SOLS (other than lower prices) of using a website to sell its products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Explain, with reference to SOLS, the difference between quality assurance and quality control.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_7115_11_2018_1.1

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(d) Identify and explain one advantage and one disadvantage to SOLS of using cost plus pricing.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think SOLS should change its method of production? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_7115_11_2018_1.1 [Turn over

4
2 AllPlay is a toyshop, set up by Vince in 2012. Each year Vince has met his business objectives
including making a profit in 2017. AllPlay imports all of its products. Vince wants to expand by
opening a second shop so he can sell a wider range of products. The cost of buying the shop is
$20 000. One option for finance is a bank loan. Vince’s bank manager will want to see AllPlay’s
Income statement, and other financial documents.
Table 1: Extract from AllPlay’s Income Statement for the year ending 30 September 2018
$ 000s
Revenue X
Less cost of sales 63
Gross profit 52
Expenses (including rent and marketing) Y
Profit 12
(a) What is meant by ‘business objectives’?
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to AllPlay of importing its products.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_7115_11_2018_1.1

5
(d) Identify and explain two ways in which the bank might use AllPlay’s financial documents.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a bank loan is the best source of finance for Vince to choose? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_7115_11_2018_1.1 [Turn over

6
3 Filltum is the brand name for a chain of vegetarian restaurants. It has 28 restaurants, 16 of which
are operated by franchisees. The Managing Director is pleased with its fast rate of growth at a time
when many businesses are failing. She said: ‘Having a well-motivated workforce is important to
our success. All new employees are given on-the-job training.’ Filltum plans to have 10 more
restaurants in the next year. The Managing Director has to decide whether to sell additional
franchises or open its own restaurants.
(a) What is meant by ‘brand name’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might fail.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which having a well-motivated workforce can help Filltum
achieve success.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_7115_11_2018_1.1

7
(d) Identify and explain two advantages to Filltum of using on-the-job training.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think selling more franchises is the best way for Filltum to expand? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_7115_11_2018_1.1 [Turn over

8
4 AHP is a multinational company. It makes mobile (cell) phones in Europe in country X. 80% of its
sales are in Europe. Some people are concerned about AHP’s impact on the environment. The
Operations Director said: ‘AHP always tries to ensure it meets all legal controls. Globalisation has
created many opportunities for AHP and its stakeholders. The Operations Director is planning to
relocate its factories to a low-cost country in Asia. Raw materials would need to be transported an
extra 4000kms. Interest rates are likely to increase across Europe.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to AHP of being a multinational company.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which AHP might have an impact on the environment.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_7115_11_2018_1.1

9
(d) Identify and explain two ways in which an increase in interest rates might affect AHP.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think AHP should relocate its factories to a low-cost country in Asia? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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1 hour 30 minutes

11_7115_12_2018_1.1
2
1 M&R Motors has 2 car showrooms. It buys old cars and repairs them before selling them to its
customers. M&R is always trying to increase added value. M&R plans to open another showroom.
The owner said: ‘Finding the right location is important. The new showroom will require a manager
and I need to find someone with the right qualities.’ The job will be advertised in the local newspaper
as shown in Figure 1. The advertisement will cost $5 for one week.
Figure 1: Job advertisement M&R is planning to use for the new manager
CAR SHOWROOM MANAGER REQUIRED

• This successful business is expanding.
• The job involves managing the office and selling cars.
• You will be in charge of three workers who will repair the cars.
• Do you have the qualities we are looking for?
• We offer good pay and working conditions.
For more information apply to M&R Motors
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two qualities that M&R might look for in the new manager.
Quality 1: ..........................................................................................................................
Quality 2: .......................................................................................................................... [2]
(c) Identify and explain two methods of selection M&R could use when choosing the new manager.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_7115_12_2018_1.1

3
(d) Identify and explain two factors that M&R might consider when deciding on a location for the
new showroom.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a newspaper is the best way for M&R to advertise the new job? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_7115_12_2018_1.1 [Turn over

4
2 FTT is a social enterprise. It sells its high quality fair-trade coffee beans to retailers in country P.
Being ethical is important to FTT. It provides local people with information about micro-finance and
skills so they can then start growing beans for FTT to sell for them. FTT wants to start exporting
coffee beans as its market research shows increasing demand for coffee in other countries. FTT’s
managers will have to decide on an appropriate pricing method to use when selling the coffee
beans in other countries.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘micro-finance’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two factors that might affect the accuracy of FTT’s market research.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_7115_12_2018_1.1

5
(d) Identify and explain two ways in which being ethical might help FTT.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Recommend an appropriate pricing method for FTT to use if it starts selling in other countries.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_7115_12_2018_1.1 [Turn over

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3 TRB is a small business in the secondary sector. TRB assembles computers. All components,
except for the battery and glass for the screen, are imported from other countries. 40% of its products
are exported. Many of its competitors are relocating to low cost countries. TRB’s Operations Director
thinks the opportunities of globalisation may be greater than the threats for TRB. She is looking at
ways to improve efficiency in the factory. One option is to introduce lean production methods.
(a) TRB is in the secondary sector. Identify the other two classifications of business sector activity.
Classification 1: ................................................................................................................
...........................................................................................................................................
Classification 2: ................................................................................................................
........................................................................................................................................... [2]
(b) Identify two ways to measure the size of a business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two methods of lean production that TRB might use.
Method 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Method 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2018 11_7115_12_2018_1.1

7
(d) Identify and explain two possible benefits to TRB of improving efficiency.
Benefit 1: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Benefit 2: ..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_7115_12_2018_1.1 [Turn over

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(e) Do you think there are more opportunities than threats from globalisation for TRB? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2018 11_7115_12_2018_1.1

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4 Bakin Group (BG) is a limited company. It has 3 holiday parks that offer families holiday
accommodation and activities. BG aims to look after its customers’ needs 24 hours a day. Customers
pay for the holidays when they arrive at the park. Each park has 3 managers and 40 part-time
employees. BG uses a wide range of social media networks for promotion. The Finance Director
is worried about BG’s cash flow position. He cannot decide if an overdraft is the best way for BG
to solve its cash flow problem.
Table 1: Cash flow forecast for period January - March 2019 ($000)
Cash in 120 80 70
Cash out:
Interest 10 10 10
Wages and other

100 90 90
costs
Total cash outflow 110 100 100
Closing balance (30) (50) Y
(a) What is meant by ‘limited company’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
© UCLES 2018 11_7115_12_2018_1.1 [Turn over

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(c) Identify and explain two advantages to BG of having part-time employees.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain one advantage and one disadvantage to BG of using social media networks
for promotion.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2018 11_7115_12_2018_1.1

11
(e) Do you think an overdraft is the best way for BG to solve its cash flow problem? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
[Total: 80]
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1 hour 30 minutes


11_7115_11_2019_1.3
2
1 BFF makes a range of computer screens that it sells to other manufacturers. The Managing Director
has been looking at BFF’s income statement. She is worried about the effects of an increase in the
cost of materials. She said: ‘Changes in technology have improved our production methods. BFF
needs to remain competitive as imports of computer screens are increasing.’ The Managing Director
has to decide whether BFF should increase its prices.
(a) What is meant by ‘income statement’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify the effect of an increase in the cost of materials on each of the following:
Cost of sales: ....................................................................................................................
...........................................................................................................................................
Gross profit: ......................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which BFF’s managers could use information contained in
the income statement.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 11_7115_11_2019_1.3

3
(d) Identify and explain two ways changes in technology used in production could help BFF to
remain competitive.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think BFF should increase its prices? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 11_7115_11_2019_1.3 [Turn over

4
2 WKN sells household goods such as plates and brushes. Last year sales in WKN’s 200 shops
increased but profit fell by 80% to $5m. WKN’s Human Resources Director said: ‘All retailers are
finding this stage of the business cycle challenging. WKN has to reorganise the business. This will
mean redundancy for 1800 shop workers. WKN plans to create 100 new jobs in the marketing
department at head office to help maintain customer loyalty. The company is working with trade
unions to carry out these changes.’ WKN has to decide whether to select the candidates for the
new jobs from the workers being made redundant.
(a) Identify two stages of the business cycle.
Stage 1: ............................................................................................................................
...........................................................................................................................................
Stage 2: ............................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways a trade union could help WKN’s employees.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 11_7115_11_2019_1.3

5
(d) Identify and explain two advantages to WKN of maintaining customer loyalty.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think WKN should select all the workers for the new jobs from those about to be made
redundant? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 11_7115_11_2019_1.3 [Turn over

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3 Keila owns a successful small bakery shop. Keila would like to expand her business. She could
open a café selling cakes and drinks in a popular tourist location. Keila plans to give out free samples
as her main method of promotion. She has prepared some customer and cost information as shown
in Table 1. Keila used primary market research to find out some of the information.
Table 1: Forecast customer and cost information for the new café
Average amount spent per customer $4
Average number of customers per week 325
Variable costs per customer $2
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the forecast revenue per week for the new café.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to Keila’s business of using free samples as a method
of promotion.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 11_7115_11_2019_1.3

7
(d) Identify and explain one advantage and one disadvantage to Keila’s business of using primary
market research.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Keila should open the new café? Justify your answer using the information in
Table 1.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2019 11_7115_11_2019_1.3 [Turn over

8
4 VXH produces a range of soft drinks made from fruit using batch production. VXH uses specialisation
in its factory. The business has grown quickly over the last two years. VXH has increased the
number of production workers from 40 to 80. This has increased the span of control for each
manager. It has been difficult for VXH to keep workers motivated. The Human Resources Manager
has to decide whether it is better to use job rotation or financial bonuses to improve employee
motivation.
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) What is meant by ‘uses specialisation’?
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why VXH has grown quickly.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two possible reasons why VXH uses batch production.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Reason 2: .........................................................................................................................
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Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think VXH should use job rotation or financial bonuses to increase employee motivation?
...........................................................................................................................................
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*0713466311*

1 hour 30 minutes


11_7115_12_2019_1.4
2
1 GOP is an oil producer based in country X. It is a public corporation. GOP plans to build a 200km
pipeline across the country using retained profits to pay for it. The pipeline will need planning
permission from the Government. Environmental pressure groups are concerned. A spokesperson
for GOP said: ‘GOP’s objectives are different to businesses in the private sector. This pipeline will
create 2000 skilled construction jobs and reduce the need for other businesses to import oil.’
(a) What is meant by ‘public corporation’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two economic objectives of country X’s government.
Objective 1: .......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways a pressure group might try to influence the actions of GOP.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain two ways in which the objectives of GOP might be different if it was in the
private sector.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
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Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think the Government should allow GOP to build the pipeline? Justify your answer.
...........................................................................................................................................
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© UCLES 2019 11_7115_12_2019_1.4 [Turn over

4
2 Samira owns a successful business selling takeaway fried food. She employs 2 part-time workers.
Last year revenue fell for the first time in 10 years. This was because of increased competition from
a well-known franchise. To respond to this, Samira could lower her prices, as shown in Table 1.
Another option is to start a delivery service. Samira plans to do some market research. She has to
decide whether to use secondary research or set up a focus group with some of her customers.
Table 1: Price and variable cost information for Samira’s business
Current price New price
Average price per item $4 $3
Average variable cost per item $2 $2
Forecast average number of

200 300
customers per week
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate Samira’s forecast weekly revenue if she lowered the price of her products.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why revenue is important for Samira’s business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 11_7115_12_2019_1.4

5
(d) Identify and explain two factors Samira should consider before starting a delivery service.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Samira should use secondary research or a focus group to gather market research
information? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2019 11_7115_12_2019_1.4 [Turn over

6
3 LBM is an online fashion clothing retailer. LBM’s target market is 18-35 year olds. Last year revenue
increased by 25% to $600m. The Marketing Director said: ‘All businesses have to satisfy customer
needs. Customer service is important which is why all employees receive induction training. LBM
offers customers a wider range of products than its competitors. Promotion is through social media
networks. Is there any reason to open our own shops?’ LBM plans to add 3500 new styles each
week and will need to arrange finance for the additional inventory.
(a) What is meant by ‘induction training’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why it is important for LBM to satisfy customer needs.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two problems for LBM of having a wide range of products available to
customers.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
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7
(d) Identify and explain one advantage and one disadvantage to LBM of opening its own shops.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two suitable sources of finance that LBM could use to purchase additional inventory.
Recommend which source of finance LBM should use. Justify your answer.
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2019 11_7115_12_2019_1.4 [Turn over

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4 NBV is a multinational company. It makes building products such as bricks. Last year NBV’s financial
accounts showed capital employed as $144 billion. NBV has operations in 18 countries and a total
workforce of 400 000. NBV experiences some diseconomies of scale. All raw materials are purchased
from the countries it operates in to avoid problems with exchange rates. NBV plans to open a factory
in Country B for the first time. Some people think this decision will only bring drawbacks for other
businesses in country B.
(a) What is meant by ‘exchange rate’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘capital employed’?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways NBV’s managers could use its financial accounts to help make
decisions.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
© UCLES 2019 11_7115_12_2019_1.4

9
(d) Identify and explain two diseconomies of scale that NBV might experience.
...........................................................................................................................................
Explanation: ......................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think NBV’s decision to set up a factory will only bring drawbacks to other businesses
in country B? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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© UCLES 2019 11_7115_12_2019_1.4

Cambridge O Level

*1914987266*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_7115_11_2020_1.4
2
1 SRB is a bank which provides loans to business customers. SRB plans to make 100 managers’
jobs redundant from its 80 branches. This would remove one level of hierarchy. This is part of its
plan to save $1m in costs over the next 2 years. The Managing Director said: ‘SRB is working with
the trade union about this plan. SRB will make more use of delegation.The bank has to respond
to increased competition from online banks. SRB could either advertise more or develop new
products and services.’
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘level of hierarchy’.
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two advantages of SRB using delegation.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 11_7115_11_2020_1.4

3
(d) Explain two factors SRB should consider when deciding which managers to make redundant.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that more advertising is a better way for a business to respond to increased
competition than introducing new products and services? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2020 11_7115_11_2020_1.4 [Turn over

4
2 YMG is a private limited company. It is the largest manufacturer of soft drinks in country V. YMG
produces 1 billion litres a year using flow production. The Managing Director wants YMG to expand.
He said: ‘I plan to increase production to 3 billion litres over the next 5 years. This will allow us to
start selling our products in new markets in other countries. I know import quotas and lack of local
knowledge can cause problems but there are ways we can overcome them.’ The Managing Director
also plans to invest $60m in new technology to improve efficiency.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two methods (other than technology) a business can use to improve efficiency.
Method 1:...........................................................................................................................
...........................................................................................................................................
Method 2:...........................................................................................................................
........................................................................................................................................... [2]
(c) Outline two sources of finance YMG could use for the new technology.
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........................................................................................................................................... [4]
© UCLES 2020 11_7115_11_2020_1.4

5
(d) Explain how each of the following problems might affect YMG when entering new markets in
other countries.
Problem caused by lack of local knowledge: ....................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem caused by import quotas: ...................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a joint venture is the best way for a business to enter a new market in another
country? Justify your answer.
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2020 11_7115_11_2020_1.4 [Turn over

6
3 Elton is a sole trader. He sells specialist clothing and equipment for sports, including baseball and
hockey. It is a niche market. Elton started his business 5 years ago and it has remained small. A
wide range of inventory is important. Elton has been looking at the financial performance of his
business. The profit margin for 2018 was 35%. An extract of the accounts is shown in Table 3.1.
Table 3.1
Revenue and cost information for Elton’s business for 2018 and 2019 ($)
2018 2019
Revenue ($) 24 000 25 000
Cost of sales ($) 7 200 Y
Gross profit ($) 16 800 18 000
Expenses ($) 8 400 10 000
Profit ($) X 8 000
(a) Define ‘sole trader’.
...........................................................................................................................................
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........................................................................................................................................... [2]
X : .......................................................................................................................................
Y: ....................................................................................................................................... [2]
(c) State four factors that can influence the amount of inventory a business might hold.
Factor 1:............................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Factor 3:............................................................................................................................
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Factor 4:............................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 11_7115_11_2020_1.4

7
(d) Explain one advantage and one disadvantage to Elton of operating in a niche market.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Elton should be pleased with the financial performance of his business? Justify
your answer using appropriate ratios.
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........................................................................................................................................... [6]
© UCLES 2020 11_7115_11_2020_1.4 [Turn over

8
4 KTF makes building materials, including cement and bricks. Last year KTF had sales of $25bn.
KTF’s objectives have often changed since it was started 60 years ago. The Managing Director
wants KTF to expand. KTF is going to take over one of its main competitors. The newly expanded
business will have combined sales of $40bn. The Managing Director said: ‘Many stakeholder groups
will be affected by this decision.’ She knows there are many external factors that affect business
activity including the business cycle, interest rates and legal controls to protect the environment.
(a) Define ‘business cycle’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a business might change its objectives.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to KTF of taking over the other business.
Advantage:........................................................................................................................
...........................................................................................................................................
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Disadvantage:....................................................................................................................
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© UCLES 2020 11_7115_11_2020_1.4

9
(d) Explain how two external stakeholder groups might be affected by the take over.
Explanation: ......................................................................................................................
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Explanation:.......................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think businesses will be more affected by new legal controls to protect the environment
than an increase in interest rates? Justify your answer.
...........................................................................................................................................
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© UCLES 2020 11_7115_11_2020_1.4

Cambridge O Level

*3750749261*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_7115_12_2020_1.3
2
1 Kolo owns a successful hairdressing salon in the city centre. He has 4 part-time employees. The
business has made a profit in each of the last 3 years. Kolo wants to expand by opening another
hairdressing salon to take advantage of the economic boom. He plans to recruit a manager for the
second salon using external recruitment. Kolo has identified 2 possible candidates for the position.
Information about them is shown in Table 1.1.
Table 1.1
Extract from Kolo’s information on the two candidates
Candidate 1 Candidate 2
Experience: 5 years experience 20 years experience
Qualifications: Advanced hairdressing certificate Basic hairdressing certificate
Other information: Never managed a salon Uses autocratic leadership style
Feature 1:..........................................................................................................................
...........................................................................................................................................
Feature 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two stages of the recruitment process.
Stage 1:.............................................................................................................................
...........................................................................................................................................
Stage 2:.............................................................................................................................
........................................................................................................................................... [2]
(c) Outline two possible advantages to Kolo of recruiting a manager.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [4]
© UCLES 2020 11_7115_12_2020_1.3

3
(d) Explain two reasons why choosing the right location for the new salon is important for Kolo.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think experience is the most important factor for a business to consider when recruiting
a new manager? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2020 11_7115_12_2020_1.3 [Turn over

4
2 DSY is a private limited company. It produces washing machines and cleaning equipment. The
Managing Director wants DSY to expand into a different market. He plans to spend $2bn on
developing electric cars. There is a lot of competition in the electric car market. This market is
growing rapidly. A leading pressure group has identified the environmental problems of non-electric
cars. The Managing Director knows that important decisions about the method of production and
the new car’s brand image still have to be made.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘brand image’.
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [2]
(c) Outline two advantages to DSY of being a private limited company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [4]
© UCLES 2020 11_7115_12_2020_1.3

5
(d) Explain two factors DSY should consider when deciding on a suitable method of production
for the new product.
Factor 1:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2:............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think entering a growing market where there is a lot of competition is the best way for
a business to expand? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2020 11_7115_12_2020_1.3 [Turn over

6
3 Veronique is bored with her work in a large factory. As a creative person, she would like to leave
and start up a flower shop. Veronique has asked about micro-finance and prepared a cash flow
forecast. An extract is shown in Table 3.1. Veronique has also carried out some market research
and found out that the demand for flowers is likely to be high during festivals. She thinks she has
the right characteristics to be a successful entrepreneur.
Table 3.1
Extract from the cash flow forecast for Veronique’s flower shop for the first 3 months ($)
Cash in 500 1 200 2 000
Cash out 1 500 1 400 1 200
Net cash flow (1 000) (200) 800
Opening balance 0 (1 000) (1 200)
Closing balance (1 000) (1 200) (400)
(a) Define ‘micro-finance’.
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Veronique now thinks that the cash inflow in month 3 will be $1 500.
Calculate the:
New net cash flow in month 3:..........................................................................................
New closing balance in month 3: ...................................................................................... [2]
(c) State four reasons why a business might have cash flow problems.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Reason 3:..........................................................................................................................
...........................................................................................................................................
Reason 4: .........................................................................................................................
........................................................................................................................................... [4]
© UCLES 2020 11_7115_12_2020_1.3

7
(d) Explain one method of primary market research and one method of secondary market research
Veronique could have used.
Method of primary market research:..................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method of secondary market research:............................................................................:
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think being creative is the most important characteristic of being a successful
entrepreneur? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
© UCLES 2020 11_7115_12_2020_1.3 [Turn over

8
4 Gino owns a fast-food restaurant selling fried chicken and potato fries. He employs 5 full-time chefs
and 12 part-time workers to serve the food. Communication is important and Gino has regular
meetings with his part-time employees to keep them informed about any changes in the menu. It
took 3 years before Gino’s business was able to break-even. He aims to achieve a Return on Capital
Employed (ROCE) of 10%. Gino is always looking for ways to increase the number of customers.
Inflation may be a problem for Gino’s business.
(a) Define ‘break-even’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘Return on Capital Employed’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two problems inflation might cause Gino’s business.
Problem 1:.........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2:.........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
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9
(d) Explain two ways Gino could increase the number of customers.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think having regular meetings is a better way for a business to communicate with
part-time employees than using text messages? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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© UCLES 2020 11_7115_12_2020_1.3

Cambridge O Level

*6515140388*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_7115_11_2021_1.2
2
1 After identifying a gap in the soft drinks market, Jerome developed a low sugar drink. He borrowed
$5 000 from family and friends to start-up a business and to provide working capital. Jerome operates
as a sole trader. To promote his product, Jerome handed out free samples in the town centre. In
the first year, Jerome’s business sold 10 000 units. This is 200 units more than his break-even
output. Jerome is considering ways to increase added value.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two ways that break-even information can help Jerome’s business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_7115_11_2021_1.2

3
(d) Explain how each of the following can help Jerome increase added value:
Change the packaging: .....................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Use cheaper materials: .....................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think giving out free samples is the best method of sales promotion for a business to
use when promoting a new food product? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_7115_11_2021_1.2 [Turn over

4
2 NSN is a multinational company. It makes cars. Over the years, technology has changed production
methods. NSN uses just-in-time inventory control in all its factories. NSN plans to open a new
factory in country Z creating 7 000 jobs. Country Z’s Government has offered an $80m grant to
NSN. A spokesperson for NSN said: ‘Governments should support business activity. There were
also other factors that influenced our decision to build the new factory there including the possible
effects of economic growth.’
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two reasons why a government might support business activity.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to NSN of using just-in-time inventory control.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_7115_11_2021_1.2

5
(d) Explain two ways in which an increase in economic growth might affect NSN’s decision to
build a new factory in country Z.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the ways technology has changed production methods benefits all employees?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_7115_11_2021_1.2 [Turn over

6
3 SBG makes a range of products including specialist paints. It has 6 factories and 700 employees.
All SBG’s employees are encouraged to be involved in decision-making. SBG’s products are
exported to 16 countries using wholesalers as its main channel of distribution. The Managing
Director said: ‘Our objectives are to grow and make a profit.’ He also recognises that all business
activity creates externalities for SBG’s stakeholder groups.
(a) Define ‘externalities’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Define ‘stakeholder groups’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Outline two reasons why profit might be important to SBG.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_7115_11_2021_1.2

7
(d) Explain two ways SBG can involve its employees in decision-making.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think using wholesalers is the best way for a large business to distribute its products?
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_7115_11_2021_1.2 [Turn over

8
4 BGR is a private limited company. It operates 6 cinemas in different towns. Effective internal
communication is important for BGR. The Finance Director has been analysing BGR’s accounts
and an extract is shown in Table 4.1. BGR plans to open another cinema and will need to recruit
10 new employees. The new cinema will cost $8m. The Finance Director has to decide whether
BGR should issue new shares or use a bank loan to finance the expansion.
Table 4.1
Extract from BGR’s Income statement for year ending 2020 ($000’s)
Revenue X
Cost of sales 180
Gross profit 720
Expenses Y
Profit 400
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify four stages of the recruitment process.
Stage 1: ............................................................................................................................
...........................................................................................................................................
Stage 2: ............................................................................................................................
...........................................................................................................................................
Stage 3: ............................................................................................................................
...........................................................................................................................................
Stage 4: ............................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_7115_11_2021_1.2

9
(d) Explain two reasons why effective communication might be important to BGR.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think issuing new shares is a better way for a limited company to finance expansion
than using a bank loan? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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© UCLES 2021 11_7115_11_2021_1.2

Cambridge O Level

*0999411117*

1 hour 30 minutes
INSTRUCTIONS
INFORMATION
11_7115_12_2021_1.2
2
1 SWB is in the secondary sector. It produces 150 000 wooden bookcases each week using batch
production. SWB sells all its output to one customer. Quality control is important. SWB has 240
employees, of which 100 are part-time workers. SWB’s managers use noticeboards around the
factory and meetings with employees every month to help reduce communication barriers. The
Operations Manager is considering introducing just-in-time inventory control to reduce the amount
of waste.
(a) Define ‘secondary sector’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two factors a business should consider when deciding whether to introduce just-in-time
inventory control.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
........................................................................................................................................... [2]
(c) Outline one advantage and one disadvantage to SWB of using quality control.
Advantage: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_7115_12_2021_1.2

3
(d) Explain two possible communication barriers that might exist at SWB.
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think it is a good idea for a business to have only one customer? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_7115_12_2021_1.2 [Turn over

4
2 Tom started ALB 5 years ago making trainers (sneakers) out of sustainable materials such as wool.
One of ALB’s objectives is to protect the environment. As part of his research, Tom calculated some
costs which he could use in his break-even analysis. An extract is shown in Figure 2.1. ALB uses
retailers to distribute its products. Tom thinks a successful entrepreneur has to be a good manager.
retailers’ costs 50%
manufacturers’ profit 5%
fixed costs 15%
variable costs 30%
0 10 20 30 40 50 60
percent
Fig. 2.1
(a) Define ‘variable costs’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two limitations of break-even analysis.
Limitation 1: ......................................................................................................................
...........................................................................................................................................
Limitation 2: ......................................................................................................................
........................................................................................................................................... [2]
© UCLES 2021 11_7115_12_2021_1.2

5
(c) Outline two possible advantages to ALB of using retailers to distribute its products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Explain one advantage and one disadvantage to ALB of trying to protect the environment.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_7115_12_2021_1.2 [Turn over

6
(e) Do you think a successful entrepreneur has to be a good manager? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_7115_12_2021_1.2

7
3 Aurelie is a sole trader. She started her small hotel 1 year ago using government support. Aurelie
knew it would be important to build good customer relationships. Aurelie wants to analyse her
financial statements using ratio analysis. An extract is shown in Table 3.1. She is worried about
how the Government’s plan to introduce a new tourist tax of $1 per tourist per night might affect
her business.
Table 3.1
Extract of Aurelie’s Income statement for 2020 ($)
Revenue 5 600
Cost of sales 1 800
Gross profit X
Expenses 2 400
Profit Y
(a) Identify two ways a government can support new business start-ups.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y : ....................................................................................................................................... [2]
(c) State four financial ratios a business can use.
Financial ratio 1: ...............................................................................................................
...........................................................................................................................................
Financial ratio 2: ...............................................................................................................
...........................................................................................................................................
Financial ratio 3: ...............................................................................................................
...........................................................................................................................................
Financial ratio 4: ...............................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_7115_12_2021_1.2 [Turn over

8
(d) Explain two ways that the introduction of a new tourist tax might affect Aurelie’s business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think offering good customer service is the best way for a small business to build
customer relationships? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2021 11_7115_12_2021_1.2

9
4 GCF is a public limited company. It provides a range of computer services to businesses including
designing websites and creating apps. The Human Resources Director use ideas based on Maslow’s
Hierarchy of Needs to help keep GCF’s 250 employees well-motivated. An extract of methods used
is shown in Table 4.1. GCF plans to expand by taking over one of its competitors. This will cost
$50m. To finance the takeover, GCF is considering issuing new shares.
Table 4.1
Extract of methods used at GCF to motivate employees
‘Employee of the month’ award
Organises team building courses
(a) Identify two features of a public limited company.
Feature 1: .........................................................................................................................
...........................................................................................................................................
Feature 2: .........................................................................................................................
........................................................................................................................................... [2]
(b) Identify the level of Maslow’s Hierarchy of Needs each of the following methods belongs to.
‘Employee of the month award’:........................................................................................
Organises team building courses: .................................................................................... [2]
(c) Outline two advantages to GCF of having well-motivated employees.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
© UCLES 2021 11_7115_12_2021_1.2 [Turn over

10
(d) Explain one advantage and one disadvantage to GCF of issuing new shares as a source of
finance.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the number of employees is the best way to measure the size of a tertiary sector
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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Cambridge International Examinations

Cambridge International General Certificate of Secondary Education

BUSINESS STUDIES 0450/12

READ THESE INSTRUCTIONS FIRST

Answer all questions.

This document consists of 9 printed pages and 3 blank pages.

(a) Identify two ways to measure the size of a business.

(b) Identify two reasons why a Government might increase taxes.

© UCLES 2017 0450/12/F/M/17

© UCLES 2017 0450/12/F/M/17 [Turn over

April May June

(a) What is meant by ‘batch production’?

(b) Calculate the following values in June.

Net cash flow: ...........................................................................................................................

Closing balance: ...................................................................................................................[2]

© UCLES 2017 0450/12/F/M/17

© UCLES 2017 0450/12/F/M/17 [Turn over

(a) What is meant by a ‘business plan’?

© UCLES 2017 0450/12/F/M/17

© UCLES 2017 0450/12/F/M/17 [Turn over

(a) Identify two stages in recruitment.

© UCLES 2017 0450/12/F/M/17

© UCLES 2017 0450/12/F/M/17

© UCLES 2017 0450/12/F/M/17

© UCLES 2017 0450/12/F/M/17

© UCLES 2017 0450/12/F/M/17

BUSINESS STUDIES 0450/12

Candidates answer on the Question Paper.

READ THESE INSTRUCTIONS FIRST

Answer all questions.

This document consists of 9 printed pages and 3 blank pages.

(a) What is meant by ‘motivation’?

(b) Identify two disadvantages to Ruby of using job production.

© UCLES 2018 03_0450_12_2018_1.15

© UCLES 2018 03_0450_12_2018_1.15 [Turn over

Table 1: Summary of financial statements

2016 ($m) 2017 ($m)

Revenue 500 350

Gross profit 210 120

(a) Identify two features of an economic boom.

Feature 2:.......................................................................................................................... [2]

(b) Calculate the current ratio in 2017.

© UCLES 2018 03_0450_12_2018_1.15

© UCLES 2018 03_0450_12_2018_1.15 [Turn over

Table 2: Forecast effect of changing price

(a) What is meant by ‘mass market’?

(b) What is meant by ‘price elastic demand’?

(c) Identify and explain two disadvantages to STC of business growth.

© UCLES 2018 03_0450_12_2018_1.15

© UCLES 2018 03_0450_12_2018_1.15 [Turn over

(a) What is meant by ‘stakeholder group’?

(b) What is meant by ‘on-the-job training’?

© UCLES 2018 03_0450_12_2018_1.15

© UCLES 2018 03_0450_12_2018_1.15

© UCLES 2018 03_0450_12_2018_1.15

© UCLES 2018 03_0450_12_2018_1.15

© UCLES 2018 03_0450_12_2018_1.15

BUSINESS STUDIES 0450/12

Candidates answer on the Question Paper.

READ THESE INSTRUCTIONS FIRST