Free GCSE Business Questions and Answers

The full-mark answer · 3 marks

Limited liability. Because the company is a separate legal person, the owners can lose only the amount they have invested. For Marchetti Ltd, which commits materials and labour to orders before it is paid and holds £240,000 of machinery, that protection is what makes the exposure acceptable: the owners can take on a large order or fund new equipment without risking personal assets. It changes what the business is willing to attempt, not merely what it stands to lose.

The full-mark answer · 6 marks

Writing a plan forces Marchetti to forecast cash rather than assume it. Because it makes kitchen furniture to order, it pays for materials and for forty people’s wages weeks before customers settle their invoices, so a company with £222,000 of net profit can still be short of cash in a particular month. A forecast identifies which month, and how deep the shortfall is, before it arrives. That turns an emergency into a negotiation: an overdraft arranged three months early is cheaper and more likely to be granted than the same request made the week the wages are due. The plan also gives the bank what it needs to assess the CNC machine, which is the immediate reason for writing one.

The full-mark answer · 6 marks

The benefit is changeover time, not capacity. Verrell sells 420 frames into a market of 5,250 , so it is not turning orders away; what it loses is most of a morning every time the jigs are changed between its four frame sizes, and the mechanics are paid for that time whether or not a frame is built. Quick-change jigs recover those hours, and because they sit inside the £62,500 of fixed costs the recovery is free at the margin. The hours then go to servicing, which uses a workshop already paid for and almost no materials, so it is nearly pure contribution. The gain is therefore higher contribution per hour worked rather than more frames sold — which also means the £18,000 should be judged against servicing revenue, not against frame sales.

The full-mark answer · 6 marks

Batching the carcasses would cut the £980 variable cost per unit, because one set-up would serve a run instead of a single job. Every pound saved lifts contribution from £500 and lowers break-even from 806 units, widening a margin of safety currently 444 units. The cost is that batching requires production before the order exists. Marchetti currently carries no finished-goods risk at all, because everything it builds is already sold; batching means guessing which widths will sell and holding those that do not. Because its customers are buying made-to-order, the sensible move is partial: batch the standard carcasses, keep the doors and the fitting bespoke, and take the cost saving on the part of the product nobody is choosing.

The full-mark answer · 3 marks

A feature of a business or its product that customers value and competitors do not have or cannot easily copy. Both conditions matter: a genuinely unique feature nobody cares about is not a selling point, and a valued feature every rival also offers is not unique. Verrell’s is that its frames are built on the premises by the mechanics who service them, which customers pay for and an online retailer cannot reproduce.

The full-mark answer · 6 marks

Selling online changes which market Verrell is in. It already takes 8% of a local market of 5,250 bicycles, so the ceiling is the size of the town rather than the capacity of the shop. A hand-built frame is a specialist product whose buyers are thinly spread across the country, and reaching them online costs almost nothing in fixed costs — the £62,500 is being paid anyway. The benefit therefore shows up as contribution on sales that could not have happened at all. Two things limit it. The frame’s premium rests on being built by the people who service it, and online it is compared with catalogue frames without that; and the servicing revenue, which is nearly pure contribution, does not travel — a customer two hundred miles away buys once and never returns.

The full-mark answer · 3 marks

It removes a single point of failure. Only two of Verrell’s four mechanics can build frames, and the £640 price depends on frames being built here, so the loss of one of those two would halve the capacity that justifies the price. Training the other two buys cover. It costs little in cash, because the workshop and the wages are fixed costs already being paid; the real cost is the trainer’s time, which is why it should be done in a quiet week rather than a busy one.

The full-mark answer · 6 marks

Delayering takes cost straight out of £403,000 , and because that is the numerator of the break-even calculation it lowers break-even from 806 units and widens the margin of safety. It also shortens the route a specification change travels between the customer and the workshop, which matters more in made-to-order production than in a factory making identical units, because every relay is an opportunity to build the wrong thing. The costs arrive later. The supervisors were checking work, so spans of control widen and oversight thins just as communication speeds up; and they were the job a good cabinetmaker was promoted into, so removing the layer removes the progression in a business already losing one in five employees a year. The saving is certain and the costs are probable, which is why delayering looks better on the year it happens than three years afterwards.

The full-mark answer · 3 marks

Because about a third of the marks are for application, awarded against a separate row of the scheme. An answer entirely correct about business in general fills the knowledge and analysis rows and leaves the application rows empty, so it is capped however well written. That is why a fluent answer about no company in particular scores four out of nine while a rougher one using the case study’s figures scores seven.

The full-mark answer · 6 marks

Two things. The larger is application: not one figure, no reference to the single supplier two hundred miles away, the make-to-order production or the £403,000 of fixed costs, and every sentence would survive the company being renamed. Both application rows are therefore empty, capping the answer around four however well the theory is handled. The second is subtler: the conclusion has a judgement’s shape without its substance. ‘It depends on its circumstances’ names no criterion, so there is nothing to credit as a decision. The figures would take it to about seven; a criterion — that with one supplier the risk outweighs a small saving — takes it to nine.