Oxford Cambridge and RSA

Monday 16 November 2020 – Afternoon

GCSE (9–1) Business
J204/02 Business 2: operations, finance and influences on
business
Time allowed: 1 hour 30 minutes
* 8 2 6 4 4 1 7 5 7 9 *

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• a calculator

* J 2 0 4 0 2 *

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Centre number Candidate number

First name(s) �

Last name �

INSTRUCTIONS
• Use black ink.
• Write your answer to each question in the space provided. You can use extra paper if
you need to, but you must clearly show your candidate number, the centre number and
the question numbers.
• Answer all the questions.

INFORMATION
• The total mark for this paper is 80.
• The marks for each question are shown in brackets [ ].
• Quality of extended response will be assessed in questions marked with an asterisk (*).
• This document has 20 pages.

ADVICE
• Read each question carefully before you start your answer.

© OCR 2020 [603/0295/1] OCR is an exempt Charity

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SECTION A

Answer all the questions.

1 Which of the following tasks is not a finance function?

A Advertising price reductions

B Applying for a bank loan

C Calculating break-even

D Measuring profit and loss

Your answer [1]

2 Which of the following issues is climate change an example of?

A A financial issue

B A quality control issue

C An economic issue

D An environmental issue

Your answer [1]

3 A manufacturer is experiencing a range of problems.

Which of the following problems would be classed as a ‘liquidity problem’?

A A breakdown on the production line

B Being short of funds to pay suppliers

C Experiencing high levels of wastage during the production process

D Having insufficient financial information to make business decisions

Your answer [1]

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4 A company’s total costs are too high. The finance manager advises that this is being caused by
increasing wage costs as the company expands.

Which one of the following actions would provide a long term solution to this problem?

A Applying for an overdraft

B Automating the production process

C Employing a finance assistant

D Switching to job production

Your answer [1]

5 A business will make a profit if it:

A ends the year with a positive bank balance

B exceeds its break-even quantity

C has costs that are greater than its revenues

D pays off all of its debts

Your answer [1]

6 Which of the following is a short-term source of finance suitable for a new business?

A Retained profit

B Sale of business assets

C Share issue

D Trade credit

Your answer [1]

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7 A company’s total costs in 2019 were £9 million. The company’s labour costs were 40% of the
company’s total costs.

The company’s labour costs in 2019 were:

A £3.6 million

B £5.4 million

C £12.6 million

D £14.4 million

Your answer [1]

8 Variable costs:

A are not affected by changes in output

B fall as output rises

C increase as output rises

D remain constant over time

Your answer [1]

9 A customer has ordered an electric shower from a plumbing firm.

By law, the plumbing firm must:

A charge a lower price than other plumbers

B fit the shower without turning the water off

C supply a shower that meets current safety standards

D use an environmentally friendly supplier

Your answer [1]

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10 Following recent financial success, a business has decided to double the size of its workforce.

This decision will significantly increase the workload of the:

A finance function because new recruits need to be trained

B human resources function because applicants need to be interviewed

C marketing function because person specifications need to be produced

D purchasing function because contracts of employment need to be issued

Your answer [1]

11 A furniture maker intends to purchase a new wood cutting machine. The expected cost and
incomes generated by the machine for the next three years are shown in the table below.

Cost of machine £6000

Income year 1 £3000

Income year 2 £3000

Income year 3 £3000

The expected average rate of return for this purchase is:

A £1000

B £3000

C 16.67%

D 33.33%

Your answer [1]

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12 An extract from Pete’s Pet Shop’s cash flow forecast for July is shown below.

July

Total cash inflow £6900

Total cash outflow ?

Net cash flow –£605

Opening balance £3000

Closing balance £2395

What is Pete’s Pet Shop’s estimated total cash outflow for July?

A £3900

B £6295

C £7505

D £9295

Your answer [1]

13 The concept of ‘quality’ refers to making products:

A by hand

B of a satisfactory standard

C that are better than the leading brand

D to the highest possible specification

Your answer [1]

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14 A business finds it relatively easy to gain customers but has great difficulty retaining these
customers.

Which aspect of the business is most likely to need improving?

A After-sales service

B E-commerce

C Marketing

D Procurement

Your answer [1]

15 Finance performance data for Pico Ltd over the last three years is shown in the table below.

2017 2018 2019

Revenue £3.1 million £3.3 million £3.5 million

Cost £2.9 million £2.9 million £2.9 million

According to the table, which of the following must be true?

A Pico Ltd has improved its market share

B Pico Ltd has decreased its prices year on year

C Pico Ltd has made a profit in all three years

D Pico Ltd has not paid its variable costs

Your answer [1]

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BLANK PAGE

PLEASE DO NOT WRITE ON THIS PAGE

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SECTION B

Answer all the questions.

16

Text 1
John Lewis & Partners
John Lewis & Partners (JLP) is a chain of department stores that stocks a wide range of
products from clothing to home furnishings. As a result it is always looking for high quality
suppliers for its products.

JLP uses face-to-face selling in its stores. Staff in the electrical department are trained to have
good product knowledge. These products include a wide range of computers, televisions and
washing machines. However, JLP’s recent growth has come from e-commerce.

JLP has a wide range of suppliers. It is important that the right supplier is chosen, so JLP will
take time evaluating new suppliers and will review existing suppliers regularly so that it can
continue supplying high quality products to its customers.

(a) (i) Explain one reason why quality is important to a business in the production of goods.

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(ii) JLP’s electrical department staff have good product knowledge. Analyse one positive
impact of this on the quality of JLP’s customer service.

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(b) Explain one role of procurement within JLP.

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(c) Explain two possible advantages to JLP of using e-commerce.

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(d) (i) Identify two factors that affect the supply decisions made by a business.

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(ii) Evaluate factors that may have influenced JLP when choosing which suppliers to use.

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Text 2
Luxury Cushions
Elizabeth owns a small business, Luxury Cushions (LC), making and selling quality cushions.
She sells these to retail shops and direct to the public over the internet. When she first started,
Elizabeth used social media to get herself well known. Her business really became successful
when she sent some cushions to celebrities and they posted them on their Instagram accounts.
Elizabeth regularly communicates to her 10 000 Instagram followers when she has new designs
to sell.

In 2019 LC earned £150 000 in revenue and had a gross profit of £118 000 and a net profit of
£56 800. Elizabeth has provided the following financial information:

Table 1 — Financial data for LC

Cushions Fixed costs Average Cost of Cost of Wage paid

made and each month Selling price each each per cushion
sold in one cushion cushion made
month filling cover

250 £7440 £50 £3 £6 £10

Elizabeth has the opportunity to expand her business by taking over a competitor and moving
into larger premises. One of her customers suggested that she could use crowdfunding to raise
the £30 000 she needs. However, Elizabeth thinks that she might be better using a bank loan.
Even though she would need to pay interest on the loan, her stable cash flow forecast shows
she should be able to afford it.

(a) Identify one reason, other than expansion, why a business may need to raise finance.

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(b) (i) Calculate the break-even point for LC.

Show your workings.

Answer: ................................................................................................................... [3]

(ii) Analyse one way Elizabeth could use her break-even data.

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(c) (i) Calculate the gross profit margin for 2019.

Show your workings.

Answer: ................................................................................................................... [2]

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(ii) Calculate the net profit margin for 2019.

Show your workings.

Answer: ................................................................................................................... [2]

(d) (i) Analyse one advantage and one disadvantage to Elizabeth of using crowdfunding to
finance the takeover.

Advantage .........................................................................................................................

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Disadvantage ....................................................................................................................

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(ii) Recommend whether Elizabeth should use crowdfunding or a bank loan to finance the
takeover.

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Text 3
Aston Martin plc
Aston Martin plc (AM plc) is a British manufacturer of luxury sports cars. It has more than 150 car
dealerships in over 50 countries on six continents. Its globalised supply chain includes suppliers from
the UK, EU and across the world. The company is also expanding its brand to include speed boats,
submarines and property development.

Its headquarters and the main production site are centrally located in Warwickshire, England, on the
site of a former RAF airbase. It employs over 3000 workers on this site, who are highly skilled engineers
and who produce each car using the most up-to-date machinery. When the cars are finished, they are
then transported from central England all over the UK and beyond. The demand for AM plc products is
influenced by many factors, including UK unemployment rates and consumer income levels.

Bar chart 1 Bar chart 2

UK unemployment rate Average UK consumer income

£32,250
8 7.5% 32,500
7 32,000 £31,750 £32,000
6% 5.5% £31,500
6 31,500
5% 4.5%
Percentage

5 31,000
4%
4 30,500
£

£30,000 £30,000
3 30,000
2 29,500
1 29,000
0 28,500
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Year Year

AM plc is proud of its commitment to the environment, which includes trying to produce goods sustainably.
It also considers ethical issues in its decision making.

(a) State one ethical consideration a business may need to consider.

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(b) Analyse one method of sustainable production that AM plc could use.

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(c) Analyse one possible factor that AM plc may have considered when choosing the location of
its main production site.

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(d) (i) Analyse, with reference to Bar chart 1, one impact on AM plc of the changes in the UK
unemployment rate.

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(ii) Analyse, with reference to Bar chart 2, one impact on AM plc of the changes in the
average UK consumer income.

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(iii) Recommend whether the change in the unemployment rate or the change in consumer
income levels will have the greatest impact on AM plc.

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(e)* Evaluate how globalisation may bring risk and reward to the shareholders of AM plc. [9]

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END OF QUESTION PAPER

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