Total marks: 90 · Duration: 1 hour 45 minutes
Instructions to candidates
• Answer all questions in Sections A, B and C. • Use black ink or black ball-point pen. • The number of marks is given in brackets [ ] at the end of each question or part question. • You may use a calculator. Show your working for calculations. • For multiple-choice questions, write the letter of one answer. • Sections B and C are based on the case studies printed before each section. Read each case study carefully and use it in your answers. • The total number of marks for this paper is 90. Section A is worth 35 marks, Section B 30 marks and Section C 25 marks. • Spend about 40 minutes on Section A, 35 minutes on Section B and 30 minutes on Section C.
Paper
Section A — Answer all questions (35 marks)
1.
(a) Which one of the following is an example of primary market research? [1] A) Reading a government report on local population B) Interviewing customers outside a shop C) Studying a competitor's published accounts D) Using figures from a trade magazine
(b) Which one of the following is most likely to be a fixed cost for a hair salon? [1] A) Shampoo used on clients B) Hair dye C) Commission paid to stylists on products sold D) Rent of the salon
(c) Define the term market segmentation. [1]
(d) A smoothie stall sells 350 smoothies a week at £3.20 each. Each smoothie has a variable cost of £1.20. The stall's fixed costs are £400 a week.
Calculate the stall's weekly profit. You are advised to show your working. [2]
(e) Explain one risk an entrepreneur faces when starting a new business. [3]
(f) Explain one benefit to a small business of using a market map. [3]
2.
(a) Which one of the following is the formula for break-even output? [1] A) Fixed costs ÷ (selling price − variable cost per unit) B) Fixed costs ÷ selling price C) (Fixed costs + variable costs) ÷ selling price D) Selling price ÷ (fixed costs − variable cost per unit)
(b) Which one of the following is a short-term source of finance for a small business? [1] A) Share capital B) Venture capital C) Bank overdraft D) Personal savings
(c) State one non-financial aim a business owner might have. [1]
(d) A business makes garden benches. Its fixed costs are £12,000 a month. Each bench sells for £25 and has a variable cost of £10.
Calculate the number of benches the business must sell each month to break even. You are advised to show your working. [2]
(e) Explain one benefit to a business of producing a cash-flow forecast. [3]
(f) Explain one way a rise in interest rates could affect a small business that uses a large bank overdraft. [3]
3.
(a) Which one of the following is a feature of a franchise? [1] A) The franchisor runs each outlet itself B) The franchisee pays a royalty to the franchisor C) The franchisee does not have to follow any rules D) The franchisor is liable for the franchisee's debts
(b) Define the term limited liability. [1]
(c) A business has an opening cash balance of £2,500 for March. During March its cash inflows are £14,000 and its cash outflows are £17,200.
Calculate the business's closing balance for March. You are advised to show your working. [2]
(d) Explain one reason why a new business might choose to locate close to its customers. [3]
(e) A small café in a town centre employs eight staff, most of them aged 21 or over and paid the National Living Wage. The government has announced an increase in the National Living Wage.
Analyse the impact of the increase in the National Living Wage on this café. [6]
Section B — Case study: Hana's Mobile Grooming (30 marks)
Read the following extract carefully, then answer Question 4.
Hana Okafor runs Hana's Mobile Grooming, a dog-grooming business in Bristol. She is a sole trader. Hana spotted the idea after noticing that many dog owners in her area worked long hours and found it hard to take their dogs to a salon. She converted a leased van into a grooming room, so she drives to the customer's home, grooms the dog in the van outside and has it back with the owner within an hour. She uses natural, unscented shampoos, which she advertises as her unique selling point (USP) together with the convenience of coming to the customer.
Hana advertises mainly through a Facebook page and a local dog-walkers' WhatsApp group, where customers post photos of their dogs after grooming. Most of her customers book again every six to eight weeks.
Table 1: Hana's Mobile Grooming, monthly figures
| Item | Amount |
|---|---|
| Price per groom | £48 |
| Variable cost per groom (shampoo, fuel, towels) | £8 |
| Fixed costs per month (van lease, insurance, phone, advertising) | £1,800 |
| Average number of grooms per month | 70 |
In 2025 a large pet-store chain opened a grooming salon two miles away, charging £39 for a standard groom. Hana has a waiting list of around 30 dogs and wants to expand. She is considering two options:
- Option 1: lease a second van (£450 a month) and employ a qualified groomer (£1,900 a month) to work in it.
- Option 2: open a small grooming salon on a local high street. Rent would be £1,100 a month and fitting it out would cost £15,000, funded by a bank loan. Hana could groom three dogs at once in the salon, but customers would have to bring their dogs to her.
4.
(a) State one feature of being a sole trader. [1]
(b) Using the information in Table 1, calculate the number of grooms Hana needs each month to break even. You are advised to show your working. [2]
(c) Explain one benefit to Hana of having a unique selling point (USP). [3]
(d) Explain one disadvantage to Hana of being a sole trader. [3]
(e) Analyse the impact on Hana's business of the pet-store chain opening a grooming salon nearby. [6]
(f) Analyse the benefits to Hana of using social media to promote her business. [6]
(g) Hana wants to expand her business.
Justify which one of the two options Hana should choose. [9]
Section C — Case study: Kiln & Clay (25 marks)
Read the following extract carefully, then answer Question 5.
Kiln & Clay is a pottery-painting café in Sheffield, opened in 2022 by two friends, Ellie Brooks and Sam Patel. Customers choose a plain plate, mug or figure, paint it while having drinks and cake, and collect it a week later after it has been fired in the café's electric kilns. The business is a partnership: Ellie and Sam each invested £20,000 of their savings and share the profit equally. Last year Kiln & Clay made a profit of £52,000.
The business has several stakeholders, including its customers, its six part-time staff, its landlord, local schools that book group sessions, and the bank that provides its overdraft.
Running costs have risen and household budgets in the area have been squeezed. The information is shown in Table 2.
Table 2: Kiln & Clay, selected figures
| Item | 2024 | 2025 |
|---|---|---|
| Average monthly energy bill | £600 | £1,050 |
| Average customers per week | 420 | 360 |
| Average spend per customer | £17.50 | £18.50 |
Ellie and Sam want to open a second café in Leeds, which would need a bank loan of around £30,000. Their bank manager has suggested that they turn the business into a private limited company (Ltd) before they expand.
5.
(a) Define the term stakeholder. [1]
(b) Explain one way the rise in energy prices could affect Kiln & Clay. [3]
(c) Explain one benefit to Kiln & Clay of writing a business plan before applying for the loan. [3]
(d) Analyse the impact on Kiln & Clay of a fall in the income households in Sheffield have available to spend. [6]
(e) Evaluate whether Ellie and Sam should change Kiln & Clay from a partnership to a private limited company. You should use the information provided as well as your knowledge of business. [12]
TOTAL FOR PAPER: 90 MARKS