A-level

Business
7132/1
Paper 1 Business 1

Specimen 2017 Morning 2 hours

Materials
For this paper you must have:
• a calculator.

Instructions
• Use black ink or black ball-point pen.
• Fill in the boxes at the bottom of this page.
• Answer all questions in Section A and Section B.
• Answer one question from Section C and one question from Section D. Write these answers
in continuous prose.
• Do all rough work in this answer book. Cross through any work you do not want to be marked.
• You must answer the questions in the spaces provided. Do not write outside the box around
each page or on blank pages.

Information
• The marks for questions are shown in brackets.
• The maximum mark for this paper is 100.

7132/1
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Section A

Answer all question(s) in this section.

Only one answer per question is allowed.

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

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 Which one of the following is a key reason for a sole trader choosing to become
a private limited company?

A More control of the finances

B Only being liable for the capital invested into the firm

C Sharing the risk of the business with other owners

D Access to more government support through grants

[1 mark]

0 2 The Bank of England decides to increase interest rates because inflation has
risen above 2.5%. What are the likely consequences for a small business to
consider?

A A fall in sales because of reduced disposable incomes

B Reduced access to finance through bank loans

C Higher payments on fixed rate loans

D A fall in sales because of higher prices

[1 mark]
 3

0 3 The budget for a firm from the last two months is set out below.
All the figures are in £’000s.

MAY JUNE
Budget Actual Budget Actual
Revenue
Shop
revenue 1050 1200 1250 990
Online
revenue 1200 1250 1450 1400
Total
revenue 2250 2450 2700 2390

Costs
Materials 200 300 250 400
Staff costs 700 800 750 800
Overheads 400 400 400 425
Bank
charges 150 150 150 150
Marketing 120 125 150 170
Total
expenditure 1570 1775 1700 1945

What is the May variance for total profit?

A Adverse variance of £205

B Favourable variance of £200

C Adverse variance of £5

D Favourable variance of £680

[1 mark]

0 4 A firm’s market share last year was 20%. The market growth this year is 20%,
but the firm’s sales volume stays the same. It’s new market share is:

A 10%

B 16.7%

C 20%

D 33.3%

[1 mark]
 4

0 5 Which of the following is a feature of lean production?

A Costs per unit are reduced because of less waste.

B Management is more efficient because of delayering.

C Workers spend more time focusing on quality.

D The business moves from labour to capital intensive

production.
[1 mark]

0 6 What are the payable days for the company whose figures are shown below?

£m
Sales revenue 7.5
Cost of sales 3.1
Net profit 1.2
Non-current assets 39.7
Net assets employed 37.1
Stock 0.5
Creditors 0.7

A 82 days

B 34 days

C 24 days

D 58 days

[1 mark]

0 7 Which of the following is a feature of Hackman and Oldman job design

characteristics to predict job satisfaction?

A All jobs must be designed to improve motivation.

B Job satisfaction depends whether each given task is

meaningful.

C Performance and therefore satisfaction must be linked to

pay.

D Capital intensive work has less satisfaction than labour

intensive work.
[1 mark]
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The following information applies to Question 8 and 9

A new games console costs £4m to develop and has an expected lifetime of 3
years. In the first year, the net return is expected to be £3m, and then £2.5m next
year and £1.5m in the last year.

0 8 What is the average rate of return for this project?

A 25%

B 33.3%

C £1m

D £3m
[1 mark]

0 9 The firm wants to protect the console from being copied. Which one of the
following would be the best method to use?

A Patents.

B Limited liability.

C Copyright.

D Rights issue.
[1 mark]

1 0 Using the data in the table, which one of the following statements is
correct for this business between 2015 and 2016?

Data on a company

2015 2016
Costs of production £200,000 £250,000
Plant and machinery £450,000 £500,000
Average number of production staff 75 70
Total output of business (units) 450,000 550,000

A Labour productivity has improved and staff unit costs have

risen.

B Labour productivity has improved and business has become

less labour intensive.

C Labour productivity has worsened and staff unit costs have

risen.

D Labour productivity has worsened and the business has

become less labour intensive.
[1 mark]
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1 1 A large multinational business organisation where the decision-making

is made a local level is known by which term?

A Centralised.

B Localised

C Delayered.

D. Decentralised.

[1 mark]

1 2 What are two methods for a services company to enter international markets?

A An alliance with a similar business and licensing their product

in that country.

B Lowering exchange rates and increasing exports of services.

C An increase in demand for services in another country and a

fall in interest rates.

D A reduction in non-trade barriers and a grant to export.

[1 mark]

1 3 According to Ansoffs’ matrix which is the least risky strategic direction for a
manufacturer of toy bikes to take?

A Expanding sales abroad.

B An increase in spending on current marketing campaigns.

C Developing a racing bike for adults.

D Buying a supplier.

[1 mark]
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1 4 A firm decides to change its pay structure by introducing piece rate payments
for its factory workers. What are the likely outcomes of this decision?

A An increase in productivity and a decrease in quality.

B A decrease in productivity and a decrease in cost per unit.

C An increase in staff turnover and an increase in cost per unit.

D An improvement in quality and an increase in cost per unit.

[1 mark]

1 5 A firm has a product has a low market share in a market which is growing.
According to the Boston Matrix, what decision best suits this firm?

A This product is a cash cow and the firm should invest the
profits into other areas of the business.

B This product is a star and the firm should continue to invest

in marketing.

C This product is a problem child and the firm needs to

consider whether to invest more money in marketing.

D This product is a star and the firm should invest the profits
into other areas of the business.

[1 mark]
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Section B

Answer all question(s) in this section.

1 6 The data in Table 3 refers to a particular business and should be used for
Questions 16.1 and 16.2.

Table 3 Data on a business

Total staff at start of the year 1450

Total staff at the end of year 1650
Total numbers of leavers 60

1 6 . 1 Based on the data in Table 3, calculate the labour turnover. Show your
workings.
[4 marks]
1 6 . 2 Based on the data in Table 3, calculate the employee retention rate for the
year. Show your workings.
[4 marks]

1 7 Explain one possible benefit of using an agent to sell a product in a

foreign market.
[4 marks]

1 8 Explain one way in which a large increase in economic growth

in the UK could affect a UK producer of small domestic appliances like vacuum
cleaners.
[5 marks]

1 9 A small business has been suffering from cash flow problems for the
last six months despite an increase in sales. Analyse how it can use debt
factoring to improve its cash flow.
[9 marks]

2 0 Many businesses are considering improving their Corporate Social

Responsibility (CSR). Analyse the benefits a financial services business
can gain from implementing a CSR policy.
[9 marks]
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Section C

Answer either question 21 or question 22

2 1 To what extent is quality assurance likely to be the best way to

improve quality in a labour-intensive business.
[25 marks]

2 2 There’s an increasing amount of information available on the internet.

To what extent does secondary research improve marketing decision making.
[25 marks]

Section D

Answer either question 23 or question 24

2 3 A small business has grown significantly in the last few years but is
now facing competition from foreign firms. To what extent do you think that
globlisation is threat or an opportunity for a growing business.
[25 marks]

2 4 E-commerce is seen as an important opportunity for many firms.

To what extent should a business invest in this method of selling.
[25 marks]