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 organic growth? [1] A) Merging with a competitor B) Opening new stores funded by retained profit C) Taking over a supplier D) Joining with a business in another country
(b) Which one of the following is a feature of a public limited company (plc)? [1] A) Its shares can be bought and sold on the stock exchange B) Its owners have unlimited liability C) It is owned by one person D) Its accounts do not have to be published
(c) Define the term product life cycle. [1]
(d) The table shows information for a clothing retailer for last year.
| Item | £ |
|---|---|
| Sales revenue | 240,000 |
| Cost of sales | 150,000 |
Using the information in the table, calculate the retailer's gross profit margin. You are advised to show your working. [2]
(e) Explain one reason why a business might use an extension strategy for one of its products. [3]
(f) Explain one disadvantage to a business of growing through a merger. [3]
2.
(a) Which one of the following is a financial method of motivating staff? [1] A) Job rotation B) Job enrichment C) Training D) Commission
(b) Which one of the following products is most likely to be made using flow production? [1] A) A wedding cake made to a customer's design B) A made-to-measure suit C) Cans of a soft drink D) A one-off garden sculpture
(c) State one method of external recruitment. [1]
(d) A business invests £50,000 in a new delivery van and expects the van to generate a total profit of £20,000 over its 5-year life.
Calculate the average rate of return (ARR) on this investment. You are advised to show your working. [2]
(e) Explain one benefit to a business of using just-in-time (JIT) stock control. [3]
(f) Explain one reason why a business might choose a supplier that charges a higher price than its rivals. [3]
3.
(a) Which one of the following is an ethical consideration for a business? [1] A) Paying its suppliers a fair price on time B) Setting its prices below those of competitors C) Increasing output to meet rising demand D) Reducing the number of products it sells
(b) Define the term globalisation. [1]
(c) The table shows information for a café chain for last year.
| Item | £ |
|---|---|
| Sales revenue | 500,000 |
| Gross profit | 200,000 |
| Other operating expenses and interest | 140,000 |
Using the information in the table, calculate the café chain's net profit margin. You are advised to show your working. [2]
(d) Explain one way a business could use social media to promote a new product. [3]
(e) A UK manufacturer of furniture imports most of its timber from Sweden and sells most of its furniture in the UK. Over the last year the value of the pound has fallen against the Swedish krona.
Analyse the impact of the fall in the value of the pound on this manufacturer. [6]
Section B — Case study: Northvale Outdoor Ltd (30 marks)
Read the following extract carefully, then answer Question 4.
Northvale Outdoor Ltd designs and makes waterproof jackets and walking trousers. It was set up in 2014 by Priya Sandhu and her brother Tom, who turned their hobby of hill-walking into a business. It became a private limited company in 2018, with Priya, Tom and two family members as shareholders.
Northvale makes its clothing in a small factory in Kendal, Cumbria, using batch production: a batch of 400 jackets in one colour and size range is made, the machines are reset, and the next batch is started. The business sells through two shops in the Lake District and through its own website. It promotes its products mainly through walking magazines and by sponsoring local mountain-rescue teams.
The business employs 46 staff. Most factory staff are experienced machinists, but six new machinists joined in the last year and two experienced staff left to work for a larger competitor. Customer reviews praise the quality of the jackets, but some customers complain that popular sizes are often out of stock online.
Table 1: Northvale Outdoor Ltd, sales revenue by channel
| Year | Shop revenue (£) | Online revenue (£) |
|---|---|---|
| 2024 | 910,000 | 480,000 |
| 2025 | 890,000 | 600,000 |
Priya and Tom want to increase sales over the next two years. They have £250,000 of retained profit available and are considering two options:
- Option 1: open a third shop, in Manchester city centre. The lease would cost £85,000 a year and the shop would need five new staff.
- Option 2: invest in a two-year social media and online marketing campaign, including paid adverts and short videos made with walking influencers, and upgrade the website so that stock levels update in real time.
4.
(a) State one method of promotion that Northvale currently uses. [1]
(b) Using the information in Table 1, calculate the percentage increase in Northvale's online revenue between 2024 and 2025. You are advised to show your working. [2]
(c) Explain one benefit to Northvale of being a private limited company. [3]
(d) Explain one reason why Northvale's managers might delegate decisions to the factory supervisors. [3]
(e) Analyse the impact on Northvale of using batch production. [6]
(f) Analyse the benefits to Northvale of training its new machinists. [6]
(g) Northvale wants to increase its sales.
Justify which one of the two options Northvale should choose. [9]
Section C — Case study: Larkfield Foods plc (25 marks)
Read the following extract carefully, then answer Question 5.
Larkfield Foods plc makes chilled ready meals that it sells to four of the UK's largest supermarket chains. It employs 220 people at its factory near Peterborough. The company has a tall organisational structure with six levels of hierarchy, from the managing director down to production operatives. Larkfield buys its vegetables and meat from 30 farms, most of them within 50 miles of the factory.
Supermarkets are under pressure from shoppers to reduce plastic. Larkfield currently packs its meals in black plastic trays, which most councils cannot recycle. Switching to recyclable card trays would add 4p to the cost of each meal. Larkfield sells around 15 million meals a year.
Larkfield's directors are considering replacing two of its manual production lines with automated lines. The information is shown in Table 2.
Table 2: Proposed automated production lines
| Item | Detail |
|---|---|
| Cost of the automated lines | £2,400,000 |
| Expected increase in profit each year (from lower costs) | £360,000 a year for 5 years |
| Jobs no longer needed | 40 production operatives |
| Estimated redundancy costs | £320,000 (one-off) |
| Output per hour, current lines | 1,800 meals |
| Output per hour, automated lines | 3,000 meals |
5.
(a) Define the term procurement. [1]
(b) Explain one disadvantage to Larkfield of having a tall organisational structure. [3]
(c) Explain one way Larkfield could make sure the quality of its ready meals stays high. [3]
(d) Analyse the impact on Larkfield of switching to recyclable card trays. [6]
(e) Evaluate whether Larkfield should replace two of its manual production lines with automated lines. You should use the information provided as well as your knowledge of business. [12]
TOTAL FOR PAPER: 90 MARKS