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 inorganic growth? [1] A) Developing a new product B) Taking over a competitor C) Opening a new branch funded by retained profit D) Increasing spending on advertising
(b) Which one of the following is a method of promotion? [1] A) Penetration pricing B) E-commerce C) Sponsorship D) Market mapping
(c) Define the term quality assurance. [1]
(d) A bakery had sales revenue of £84,000 last year. Its cost of sales was £63,000.
Calculate the bakery's gross profit margin. You are advised to show your working. [2]
(e) Explain one advantage to a business of having a flat organisational structure. [3]
(f) Explain one reason why a business might use competitive pricing. [3]
2.
(a) Which one of the following is a non-financial method of motivating staff? [1] A) A bonus B) Profit sharing C) Job enrichment D) Fringe benefits such as a company car
(b) Which one of the following stages of the product life cycle usually has the highest sales? [1] A) Maturity B) Introduction C) Development D) Decline
(c) State one method of training staff. [1]
(d) A manufacturer's sales volume fell from 15,000 units in 2024 to 12,600 units in 2025.
Calculate the percentage decrease in sales volume. You are advised to show your working. [2]
(e) Explain one benefit to a business of having a good relationship with its suppliers. [3]
(f) Explain one reason why a business might need to retrain its staff after introducing new technology. [3]
3.
(a) Which one of the following is a source of finance available to a public limited company but not to a private limited company? [1] A) A bank loan B) Retained profit C) A bank overdraft D) Selling shares to the general public on the stock market
(b) Define the term multinational. [1]
(c) The table shows information for a sports retailer for last year.
| Item | £ |
|---|---|
| Sales revenue | 600,000 |
| Gross profit | 180,000 |
| Operating expenses | 126,000 |
| Interest | 9,000 |
Using the information in the table, calculate the retailer's net profit margin. You are advised to show your working. [2]
(d) Explain one way a tariff placed on its exports could affect a UK business. [3]
(e) A clothing retailer has been criticised in the media for buying from overseas factories that pay their workers very low wages. It is considering changing to suppliers that pay their workers fairly, which would increase the cost of each item by about 8%.
Analyse the impact on the retailer of changing to suppliers that pay their workers fairly. [6]
Section B — Case study: Crest Coffee Roasters Ltd (30 marks)
Read the following extract carefully, then answer Question 4.
Crest Coffee Roasters Ltd buys green (unroasted) coffee beans from growers in Colombia, Ethiopia and Brazil and roasts them at its unit in Bristol. Beans are roasted in batches of 60 kg, each batch to a different recipe, then packed into 1 kg bags. Crest sells mainly to independent cafés and restaurants in the south-west of England. It employs 18 staff, including four sales representatives who visit cafés, offer free barista training and take orders.
All of Crest's coffee is bought from Fairtrade certified co-operatives, which guarantee growers a minimum price. Over the last year the world price of green coffee rose by around 30%, and Crest also had to replace its ageing delivery van.
Table 1: Crest Coffee Roasters Ltd, selected financial information
| Item | 2024 | 2025 |
|---|---|---|
| Sales revenue | £1,100,000 | £1,250,000 |
| Net profit | £110,000 | £100,000 |
| Average price per kg sold to cafés | £22 | £22 |
Crest's directors want to grow sales outside the café market. They are considering two options:
- Option 1: supply a regional supermarket chain with Crest's own-brand 250 g bags in 60 stores. The supermarket would pay the equivalent of £14 per kg and wants deliveries every week.
- Option 2: launch a coffee subscription website that sends freshly roasted bags to households every month for £8.50 per 250 g bag (the equivalent of £34 per kg), including postage.
4.
(a) Identify one method of production Crest uses. [1]
(b) Using the information in Table 1, calculate Crest's net profit margin for 2025. You are advised to show your working. [2]
(c) Explain one benefit to Crest of buying its coffee from Fairtrade suppliers. [3]
(d) Explain one way Crest's sales representatives help its sales process. [3]
(e) Analyse the reasons why Crest's net profit fell between 2024 and 2025, even though its sales revenue rose. [6]
(f) Analyse the impact on Crest of increasing the price it charges cafés by 10%. [6]
(g) Crest wants to grow its sales outside the café market.
Justify which one of the two options Crest should choose. [9]
Section C — Case study: Bloom Fitness plc (25 marks)
Read the following extract carefully, then answer Question 5.
Bloom Fitness plc runs 40 low-cost gyms across the Midlands and the north of England. Members pay £24.99 a month and can cancel at any time. Most of Bloom's fitness instructors work on freelance contracts: they are self-employed, rent space in the gym and charge members directly for personal training. Each gym has a small team of permanent staff to manage the building and sell memberships.
Bloom's labour turnover among permanent staff was 38% last year, and managers say the cost of recruiting and training replacements is rising.
Bloom's directors are considering a takeover of FitHub, a rival chain of 12 gyms. The information is shown in Table 2.
Table 2: The proposed takeover of FitHub
| Item | Detail |
|---|---|
| Price Bloom would pay for FitHub | £18,000,000 |
| FitHub's annual profit | £1,500,000 |
| How Bloom would finance the takeover | Selling new shares on the stock market |
| FitHub gyms in towns where Bloom already has a gym | 4 of the 12 |
| FitHub's monthly membership price | £34.99 |
5.
(a) Define the term takeover. [1]
(b) Explain one way Bloom could reduce its labour turnover. [3]
(c) Explain one disadvantage to Bloom of being a public limited company. [3]
(d) Analyse the impact on Bloom of employing most of its fitness instructors on freelance contracts. [6]
(e) Evaluate whether Bloom should take over FitHub. You should use the information provided as well as your knowledge of business. [12]
TOTAL FOR PAPER: 90 MARKS