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A-level
BUSINESS
Paper 1 Business 1

Monday 12 June 2017 Afternoon Time allowed: 2 hours

Materials For Examiner’s Use
For this paper you must have:
 a calculator. Question Mark
Section A
Instructions
16
 Use black ink or black ball-point pen.
 Fill in the boxes at the top of this page. 17
 Answer all questions in Section A and Section B. 18
 Answer one question from Section C and one question from Section D. 19
 You must answer the questions in the spaces provided. Do not write
20
outside the box around each page or on blank pages.
 Do all rough work in this answer book. Cross through any work that you 21
do not want to be marked. 22
23
Information
24
 The marks for questions are shown in brackets.
 The maximum mark for this paper is 100. 25

TOTAL

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Section A

Answer all questions in this section.

Only one answer per question is allowed.

For each answer 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 farmer takes over a retailer in order to sell its produce. This is an example of

A horizontal integration.

B backward vertical integration.

C forward vertical integration.

D conglomerate integration.
[1 mark]

0 2 Figure 1 below shows a stakeholder map.

Figure 1: Stakeholder map

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For this particular business, which stakeholder group is most likely to influence this
business’ management decision-making?

A Suppliers

B Customers

C Shareholders

D Employees
[1 mark]

0 3 A business experiencing a lower level of capacity utilisation than usual may benefit
because it

A reduces the average costs of production.

B provides more time for maintenance and repair of machinery.

C can increase employee morale, because employees feel

more secure in their jobs.

D represents a more efficient use of capital equipment.

[1 mark]

0 4 The information below is an extract from a company’s annual accounts.

 Current assets: £3 million
 Current liabilities: £2.4 million
 Non-current liabilities: £4.2 million
 Capital employed: £12 million
The company’s gearing ratio is

A 35%

B 250%

C 20%

D 5%
[1 mark]

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0 5 Options A to D below show four different combinations of monetary and fiscal policy.
Which combination is most likely to lead to an increase in sales for a company that
builds houses? Assume there are no other changes.

A Decreasing interest rates and decreasing taxation

B Decreasing interest rates and increasing taxation

C Increasing interest rates and decreasing taxation

D Increasing interest rates and increasing taxation

[1 mark]

0 6 A business helps its local community with a view to improving the quality of life of
nearby residents. In Carroll's pyramid of corporate social responsibility, this is most
likely to be an example of

A economic responsibility.

B ethical responsibility.

C legal responsibility.

D philanthropic responsibility.
[1 mark]

0 7 An approach to examine the impact of possible changes on the predicted financial

outcome of an investment is known as

A investment criteria.

B non-financial factors.

C sensitivity analysis.

D the discount rate.

[1 mark]

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0 8 Starbucks is an American coffee shop. In recent years it has opened over 300 tea
shops in America to appeal to its existing customers. According to Ansoff’s matrix
this is an example of

A diversification.

B market development.

C market penetration.

D product development.
[1 mark]

0 9 Which type of crisis is most likely to occur at point 3 of Greiner’s model of growth
shown below?

A Leadership crisis

B Autonomy crisis

C Red tape crisis

D Control crisis
[1 mark]

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1 0 Figure 2 below contains data on the costs of producing a given product.

Figure 2
Output (units) Total costs (£)
0 40
1 80
2 110
3 150

Calculate the total variable costs of producing 3 units of output.

A £30

B £40

C £100

D £110
[1 mark]

1 1 Statement 1: ‘According to Taylor, piece rate payments will usually motivate

workers.’

Statement 2: ‘According to Herzberg, piece rate payments will usually motivate

workers.’

Read statements 1 and 2 and select the correct option from the following options:

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

[1 mark]

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1 2 According to Lewin’s force field analysis

A change will occur if driving forces are stronger than

restraining forces.

B change will occur if negative forces equal positive forces.

C a company will grow if its strengths and opportunities

outweigh its weaknesses and threats.

D a company will grow if horizontal forces and vertical forces

are balanced.
[1 mark]

1 3 Statement 1: ‘Penetration pricing is more likely to be used if demand is price

inelastic.’

Statement 2: ‘Price skimming is more likely to be used if demand is price elastic.’

Read statements 1 and 2 and select the correct option from the following options:

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

[1 mark]

1 4 In a business each employee has a job with clear rules and procedures.
Which of Handy’s cultures does this description most closely correspond to?

A Person culture

B Power culture

C Role culture

D Task culture
[1 mark]

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1 5 The network in Figure 3 shows the activities involved in the launch of a new product.
All timings are in days.

Figure 3: Network for the launch of a new product

The duration of the critical path for this network is:

A 23 days

B 21 days

C 15 days

D 13 days
[1 mark] 15

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Turn over for the next section

DO NOT WRITE ON THIS PAGE

ANSWER IN THE SPACES PROVIDED

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Section B

Answer all questions in this section.

The data in Figure 4 shows the expected financial outcomes of an investment into
new equipment.

Figure 4

Year Annual Annual Net return Discount

inflows outflows (£000) factor (5%)
(£000) (£000)
0 0 50 (50) 1.00
1 30 17 13 0.95
2 40 12 28 0.91
3 40 13 27 0.86

1 6 Based on the data in Figure 4, calculate the payback of the investment.

[3 marks]

Payback

Workings

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1 7 Based on the data in Figure 4, calculate the Net Present Value of the investment.
[4 marks]

Net Present Value

Workings

1 8 A fashion chain decides to switch to ‘fair trade’ clothing in its shops. Explain one
possible consequence for the fashion chain.
[4 marks]

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1 9 Explain how the use of break-even analysis might help an entrepreneur make
decisions about the start-up of a new business.
[6 marks]

Extra space

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2 0 A café sells two types of hot drinks. These drinks have the following income
elasticities of demand:

Income elasticity of
demand
Coffee +2.0
Tea -0.5

The volume of coffee sales is several times greater than the volume of tea sales.
Based on the information above, analyse how the café’s overall sales volume of hot
drinks would be affected by a rise in consumers’ incomes. Assume there are no
other changes.
[9 marks]

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2 1 Use the data in Figure 5 to explain how the use of debt factoring would benefit ABC
Ltd.
[9 marks]
Figure 5: Extracts from the balance sheet of ABC Ltd.
31.3.2015 31.3.2016 31.3.2017
(£000) (£000) (£000)
Inventories 200 230 250
Receivables 300 500 690
Cash 400 200 0
Total current assets 900 930 940
Payables 500 530 550

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Extra space

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Section C

Answer either Question 22 or Question 23.

Shade the lozenge below to indicate which optional question(s) you have answered.

Question 2 2 Question 2 3

CORRECT METHOD WRONG METHODS

2 2 A business wants to increase the productivity of its workforce.

To what extent is the greater use of delegation likely to be an effective way for the
business to achieve this?
[25 marks]
OR

2 3 A business has recently started to use Elkington’s Triple Bottom Line to assess its
overall performance.

To what extent do you think the business is likely to have lower profits as a result of
this?
[25 marks]

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Turn over for Section D

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Section D

Answer either Question 24 or Question 25.

Shade the lozenge below to indicate which optional question(s) you have answered.

Question 2 4 Question 2 5

CORRECT METHOD WRONG METHODS

2 4 A business has had a record of poor innovation for many years.

To what extent do you think that if the business increases its investment spending
on innovation this will lead to more success in this area?
[25 marks]

OR

2 5 A business is experiencing a fall in its market share.

To what extent might the greater use of digital technology enable the business to
increase its market share?
[25 marks]

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END OF QUESTIONS

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There are no questions printed on this page

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ANSWER IN THE SPACES PROVIDED

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