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AS
BUSINESS
Paper 1 Business 1

Friday 15 May 2020 Afternoon Time allowed: 1 hour 30 minutes

Materials
For Examiner’s Use
For this paper you must have:
• a calculator. Question Mark
Section A
Instructions
• Use black ink or black ball-point pen. 11
• Fill in the box at the top of this page. 12
• Answer all questions. 13
• You must answer the questions in the spaces provided. Do not write
14
outside the box around each page or on blank pages.
• If you need extra space for your answer(s), use the lined pages at the end of 15
this book. Write the question number against your answer(s). 16.1
• Do all rough work in this answer book. Cross through any work
16.2
you do not want to be marked.
17.1
Information 17.2
• The marks for questions are shown in brackets.
TOTAL
• The maximum mark for this paper is 80.

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Section A box

Answer all questions in this section.

Only one answer per question is allowed.

For each question completely fill in the circle alongside the appropriate answer.

CORRECT METHOD WRONG METHODS

If you want to change your answer you must cross out your original answer as shown.

If you wish to return to an answer previously crossed out, ring the answer you now wish to select
as shown.

0 1 A business moves an employee to a different job.

This is known as
[1 mark]

A delayering

B delegating

C redeployment

D redundancy

0 2 A supplier asks 200 consumers to explain why they like its products. The supplier
passes their responses on to a retailer.

For the retailer this is an example of

[1 mark]

A qualitative, primary market research.

B qualitative, secondary market research.

C quantitative, primary market research.

D quantitative, secondary market research.

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0 3 An organised association of workers, formed to protect and further their rights and box

interests, is known as a
[1 mark]

A Human resources department

B Kaizen group

C Trade union

D Works council

0 4 Figure 1 shows a situation in which there is a change in the break-even point of a

product from point X to point Y.

Figure 1

The change in break-even point from X to Y has been caused by

[1 mark]

A a fall in fixed costs and a fall in variable costs per unit.

B a fall in fixed costs only.

C a fall in the selling price and fall in fixed costs.

D a fall in variable costs per unit only.

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0 5 The data below in Table 1 shows the weekly output and total costs of a business. box

Table 1

Weekly output Total costs

(units) (£)
0 420

1 700

2 950

3 1320

4 1750

The total variable cost of producing three units of output is

[1 mark]

A £420

B £440

C £900

D £1320

0 6 Statement 1: ‘One purpose of stakeholder mapping is to show the level of power of

different stakeholders’.

Statement 2: ‘One purpose of stakeholder mapping is to show the level of interest of

different stakeholders’.

Read statements 1 and 2 and select the correct option from the following:
[1 mark]

A Statement 1 is true. Statement 2 is true.

B Statement 1 is true. Statement 2 is false.

C Statement 1 is false. Statement 2 is true.

D Statement 1 is false. Statement 2 is false.

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0 7 Statement 1: ‘If its product is perishable, a business is likely to have a high buffer box

level of inventory’.

Statement 2: ‘If a business buys its materials from a just-in-time supplier in the same
town, there is likely to be a long lead time for supplies’.

Read statements 1 and 2 and select the correct option from the following:
[1 mark]

A Statement 1 is true. Statement 2 is true.

B Statement 1 is true. Statement 2 is false.

C Statement 1 is false. Statement 2 is true.

D Statement 1 is false. Statement 2 is false.

0 8 The data in Table 2 refer to Abacus plc in 2018 and 2019.

Table 2

2018 2019

Number of employees 20 40

Output (units) 50 100

Capacity (units) 100 200

Statement 1: ‘Labour productivity has stayed the same between 2018 and 2019’.

Statement 2: ‘Capacity utilisation has stayed the same between 2018 and 2019’.

Read statements 1 and 2 and select the correct option from the following:
[1 mark]

A Statement 1 is true. Statement 2 is true.

B Statement 1 is true. Statement 2 is false.

C Statement 1 is false. Statement 2 is true.

D Statement 1 is false. Statement 2 is false.

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0 9 A manager uses decision trees to choose the best financial outcome from four box

different options. Results from these options are shown below.

Option Result 1 Result 2

A Expected value = +£2 million Pay-off of best outcome = +£18 million

B Net gain = +£3 million Pay-off of best outcome = +£12 million

C Net gain = +£2 million Expected value = +£4 million

D Net gain = +£1 million Expected value = +£7 million

Which one of these options is most likely to be chosen by the manager?

[1 mark]

A Option A

B Option B

C Option C

D Option D

1 0 Receivables are the value of

[1 mark]

A a business’s sales revenue.

B inventory held by a business.

C money owed to a business by its customers.

D money owed to suppliers by a business. 10

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Section B box

Answer all questions in this section.

1 1 A business with a reputation for manufacturing a high-quality product has introduced

piece-rate pay for its factory workers.

Explain one possible disadvantage to this business of using piece-rate pay.

[4 marks]

1 2 The following data applies to a business:

Fixed costs £1.5 million

Total costs £6 million

Output 2 million units

Profit £3 million

Calculate the selling price per unit.

[3 marks]

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1 3 A family-owned private limited company is planning an expansion. box

Explain one disadvantage to the shareholders of this business of selling shares to finance
this expansion.
[4 marks]

1 4 A business budgeted its labour costs to be £4 million for 2019. It recorded an adverse
variance of £2 million on this budget.

Explain one action the business managers might take in these circumstances.
[4 marks]

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1 5 A business has a manager with a ‘country club’ style of management on the Blake box

Mouton grid. It replaces this manager with one who has a ‘produce or perish’ style.

Analyse one impact this change could have on the motivation of the business’s
employees.
[5 marks]

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Answer all questions in this section.

1 6 Horizons Ltd

In 2010, Yusuf set up his own accountancy business, Horizons Ltd. Yusuf had
previously been a successful manager in a large accountancy company.

Currently, Yusuf has 18 employees, all of whom report directly to him. Yusuf tells his
staff to check all important decisions with him; he says this is because one wrong
decision could be costly for the business both financially and in terms of its reputation.

As the business has grown, Yusuf has had to work longer hours. He is finding this
workload a strain and recently had time off with stress. This delayed the completion of
some jobs and Horizons Ltd had to charge some of its clients less for this accounting
work as a result.

To try to increase revenue, Yusuf has recently decreased prices. Horizons Ltd now
charges around 10% less than rivals. The business also spent £45 000 for the year on
the promotional mix; £35 000 of this was on print advertising such as newspapers and
£10 000 a year on social media advertising.

Yusuf’s team is made up of newly qualified accountants. Staff morale is very low. The
productivity of the staff is lower than at several rival businesses despite the fact that
they are paid 8% more than the industry average. Many staff feel they are unable to
use their initiative and that they have little responsibility. Labour turnover is high at the
business.

Yusuf has recently hired a management consultant to look at how he can improve the
performance at Horizons Ltd.

The consultant:

• has produced some analysis of the forecasted effectiveness of print and social
media advertising for Horizons Ltd (see Figure 2 and Figure 3)
• has estimated that the price elasticity of demand for Horizons Ltd work is –0.3.

The consultant has also produced a plan for a new organisational design in which she
recommends that Yusuf:

a) recruits three new managers from outside of the business to manage six staff each
b) delegates to these new managers much of his day-to-day work.

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Figure 2 box

Figure 3

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1 6 . 1 Analyse the marketing actions that Horizons Ltd could take to increase its revenue. box

[9 marks]

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1 6 . 2 Yusuf is considering the consultant’s plan for a new organisational design at Horizons box

Ltd. Do you think it would be a good idea for Yusuf to adopt this plan? Justify your
answer.
[16 marks]

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1 7 Glade Ltd
box

Mary is the Chief Executive of Glade Ltd, a company that manufactures tables. Glade
Ltd currently produces 4000 tables each year. It hopes to increase sales by 50% over
the next three years and even more in the long run.

Glade Ltd has a reputation for being ethical because:

• Glade Ltd’s mission is to be the leader in its industry for using sustainable materials in
its products. This means, for example, that it uses wood from companies that replant
new trees to replace those cut down. Glade Ltd’s main competitors use about 40% of
sustainable materials in their final products. Glade Ltd currently has 70% of
sustainable materials and wants to continue improving this
• it pays its suppliers within one month of delivery.

Glade Ltd makes relatively low profits but a bigger issue is its regular cashflow
problems. The company’s bank manager has offered Mary a large overdraft facility and
has told her that interest rates are likely to fall soon. Mary is not sure whether to take
out an overdraft or not.

Glade Ltd sells all its tables to three big retailers. These retailers buy in large quantities.
Glade Ltd typically gets paid between two and three months after it delivers the orders.
Glade Ltd’s largest rival gets paid within six weeks by threatening to charge interest on
money still owed after this time.

Glade Ltd has one main supplier for the materials it uses in its tables. Mary has recently
appointed a new operations manager, who has suggested that Glade Ltd switches to a
new supplier. The comparison of suppliers is given in Table 3. The price of materials
and payment terms would be the same for both suppliers.

The operations manager also thinks that Glade Ltd should try to reduce the amount of
warehousing space the company has and sell some of the land where it is based.

Table 3

Existing supplier New supplier

Capacity for orders for

5700 a year 9000 a year
Glade Ltd

Lead time 12 days 8 days

Percentage of materials
supplied to customers that are 70% 90%
from sustainable sources

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1 7 . 1 With reference to Table 3, analyse the ways in which changing supplier could improve box

Glade Ltd’s profits.

[9 marks]

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1 7 . 2 Mary is concerned about Glade Ltd’s cashflow problems. Do you think an overdraft is box

the best way to deal with the company’s long-term cashflow problems?
[16 marks]

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END OF QUESTIONS

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