Oxford Cambridge and RSA

Monday 10 January 2022 – Afternoon

Level 3 Cambridge Technical in Business
05834/05835/05836/05837/05878 Unit 1: The business environment
Time allowed: 2 hours
C420/2201
C 4 2 0 - - 2 2 0 1

You must have:

• a clean copy of the Pre-release
(inside this document)

You can use:

• a calculator

0 5 8 3 4 - 0 1

Please write clearly in black ink.

Centre number Candidate number

First name(s)

Last name

Date of birth

INSTRUCTIONS FOR EXAMINER

• Use black ink. USE ONLY
• Write your answer to each question in the space provided. You Question No Mark
can use extra paper if you need to, but you must clearly show your
Section A: 1-20 /20
candidate number, the centre number and the question numbers.
Section B: 21 /2
• Answer all the questions.
22 /4
INFORMATION 23 /4
• The total mark for this paper is 90. 24 /6
• The marks for each question are shown in brackets [ ]. 25 /4
• This document has 20 pages. Section C: 26 /2
27 /4
ADVICE
28 /12
• Read each question carefully before you start your answer.
29 /3
30 /12
31 /5
32 /12
Total /90
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Section A

Answer all the questions. Put a tick () in the box next to the one correct answer
for each question.

1 Which of the following is an environmental factor that a manufacturer should consider?

A Advances in mobile communications

B Business framework legislation

C Carbon emission levels

D Workforce exploitation
[1]

2 Taxation involves:

A giving crowd-funders their money back

B paying money to the government

C refunding customers

D rewarding shareholders
[1]

3 A share issue is a:

A long-term source of finance that is available to all businesses

B long-term source of finance that is only available to limited companies

C short-term source of finance that is available to all businesses

D short-term source of finance that is only available to limited companies

[1]

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4 The term ‘delegation’ refers to:

A encouraging all employees to make their own decisions

B giving a lower-ranked employee the authority to do a task

C passing responsibility for a task to a subordinate

D requesting assistance from a line manager

[1]

5 Which one of the following tasks is most likely to be carried out by an employee working in
customer services?

A Despatching goods to a customer’s address

B Issuing invoices and receipts to customers

C Managing customer expectations

D Sending market research surveys to customers

[1]

6 Exchange rates for the British pound to the US dollar have risen from £1 = $1.10 to
£1 = $1.25.
How can UK businesses take advantage of this change in exchange rates?

A By borrowing more money from US banks

B By exporting more goods to the US

C By importing more goods from the US

D By lending more money to US businesses

[1]

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7 Which of the following is an example of ‘redundancy’?

A An accounts clerk losing their job due to being grossly incompetent

B A sales assistant being dismissed for theft of company stock

C The dismissal of a production worker whose job role is no longer needed

D The termination of a worker’s contract of employment due to pregnancy

[1]

8 Which group of business stakeholders are all external?

A Central government, directors, lenders

B Customers, managers, suppliers

C Employees, local government, trade unions

D Local community, potential investors, pressure groups

[1]

9 A manufacturer made 4000 guitars last year. The manufacturer’s costs and revenue were as
follows:
• Labour: £110 per guitar.
• Parts: £48 per guitar.
• Manufacturing overheads: £380 000 per annum.
• Administrative overheads: £120 000 per annum.
• Revenue: £800 000 per annum.

The manufacturer’s fixed costs for last year were:

A £380 000

B £500 000

C £1 132 000

D £1 300 000
[1]

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10 Which of the following is not a way a business can be organised?

A By function

B By geographic location

C By legal status

D By service provision
[1]

11 Which of the following is a likely impact of automation on employees?

A Higher profit

B Increased labour costs

C Lower unemployment

D Reduced job security

[1]

12 The introduction of a new government initiative is an example of:

A a legal change

B an environmental change

C a political change

D a social change
[1]

13 Which of the following job roles would be at the bottom of a supermarket chain’s organisation
chart?

A Company director

B Sales assistant

C Store manager

D Team supervisor
[1]

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14 Misal Ltd’s cash flow forecast for the next three months of trading is shown below.

February March April

Cash inflows £300 000 £550 000 £500 000
Cash outflows £360 000 £520 000 £620 000
Net cash flow (£60 000) £30 000 (£120 000)
Opening balance (£100 000) (£160 000) (£130 000)
Closing balance (£160 000) (£130 000) (£250 000)
The minimum amount of overdraft Misal Ltd is likely to require in March is:

A £100 000

B £130 000

C £160 000

D £250 000
[1]

15 Which of the following functional areas of a business would be responsible for designing new
products?

A Business support services

B Procurement

C Production

D Research and development

[1]

16 Which of the following is a non-financial factor which could increase the likelihood of
business failure?

A Charging high prices

B Having a low market share

C Few competitors

D Poor cash flow

[1]

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17 The process where conflict between stakeholder objectives is minimised but not completely
removed is called:

A conflict management

B conflict resolution

C stakeholder analysis

D stakeholder delegation
[1]

18 The sales function of a public limited company fails to inform the human resources function
that it needs more staff over the Easter period.
Which of the following is this an example of?

A A lack of decision-making by external stakeholders

B Decentralised problem solving

C Management empowerment

D Poor interrelationships between business functions

[1]

19 A business is conducting a SWOT analysis. Which pair of categories contains factors which
the business can control?

A Opportunities and Strengths

B Opportunities and Threats

C Strengths and Weaknesses

D Threats and Weaknesses

[1]

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20 An income statement shows:

A assets and liabilities

B cash inflows and outflows

C inputs and outputs

D revenue and expenses

[1]

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Section B

Answer all the questions in this section.

All of the questions in this section should be answered in relation to businesses you have
researched. A clean copy of the research brief is provided.

21 Identify two forms of promotional media used by the marketing function of a business you
have researched.

Name of business ......................................................................................................................

Activity of business ...................................................................................................................

1 ...................................................................................................................................................

2 ...................................................................................................................................................
[2]

22 Describe two corporate social responsibility activities of a business you have researched.

Name of business ......................................................................................................................

Activity of business ...................................................................................................................

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2 ...................................................................................................................................................

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[4]

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23 Explain two key tasks of the chief executive at a company that you have researched.

Name of business ......................................................................................................................

Activity of business ...................................................................................................................

1 ...................................................................................................................................................

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2 ...................................................................................................................................................

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[4]

24 Analyse one advantage and one disadvantage to a business that you have researched of
using reserves as a source of finance.
[6]

Name of business ......................................................................................................................

Activity of business ...................................................................................................................

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

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25 Explain how a business you have researched complies with the Consumer Rights Act.

Name of business ......................................................................................................................

Activity of business ...................................................................................................................

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[4]

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Section C

Read the scenario below. Answer all the questions in this section.

Business scenario: Filmore Pancakes

Filmore Pancakes is a hot food takeaway restaurant. The takeaway sells a range of whole-grain,
buttermilk, American-style pancakes with healthy toppings. Beth Filmore, a single parent, set up
Filmore Pancakes just over a year ago, shortly after her daughter started secondary school. All
of the pancakes are cooked fresh to order using a low-fat, high-fibre recipe. The takeaway’s best
sellers are a savoury pancake topped with wild mushrooms and tomato and a sweet pancake
topped with fresh pineapple and mango sauce. Beth, a sole trader, employs five part-time
assistants to help run the business.
Filmore Pancakes operates from small premises on the edge of a large housing estate in the
Midlands, where disposable income levels are low. The takeaway is open five days a week
(Wednesday to Sunday); lunchtimes from noon to 3 pm and evenings from 6 pm to 9 pm. Most
lunchtime customers are local, mainly students from the nearby college or residents returning
home after shopping. Filmore Pancakes is also receiving an increasing number of lunchtime
orders from workers at a business park two miles away, who phone in their orders in advance
to save time. In the evening its customers tend to be young couples and families, many from
the estate but also some who live further away. Filmore Pancakes is also popular with local
teenagers, who like to gather on the pavement outside to eat whilst chatting to their friends.
To fund the start-up of the business Beth took out a second mortgage of £80 000 on her
3-bedroomed house, traded in her car for a small van and applied for a bank overdraft. The bank
requested a copy of Filmore Pancakes’ business plan before agreeing to an overdraft limit of
£6000. The business plan includes specific objectives for the end of Year 1, together with plans
for developing the business’ service provision when finances permit. In Year 2, Beth would like
to obtain planning permission from the local council to add a canopy to the front of the premises
and put tables and chairs on the pavement in the summer months. In Year 3, she would like to
add a home delivery service.
Being a sole trader has proved far more difficult than Beth thought it would be. New ideas are
difficult to come by. The hours are long and hard. There are always more tasks to be done, such
as buying stock or banking cash. She has had no time to enjoy her hobbies all year and she has
not been out with friends since her birthday. Money is in short supply. Childcare, especially in
the school holidays, is problematic and visiting her mother in the USA is impossible. In addition,
Beth constantly worries about her or her daughter becoming ill, an employee having an accident
at work or a customer having an allergic reaction.
Nevertheless, Beth believes that the sacrifices will be worth it. She hopes that by the time her
daughter is 18 the business will be making enough money to not only pay the household bills,
but also fund her daughter through university. She wonders whether the business is on target
and which, if any, of its Year 1 objectives (see Table 1 below) have been achieved.

Table 1: Objectives for end of Year 1 (from Filmore Pancakes’ business plan)
Objective A Number of customers per month (on average) 1500
Objective B Revenue per customer (on average) £10.00
Objective C Total costs per month (on average) £12 000
Objective D Profit for the year £10 000

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All of the questions in Section C should be answered in relation to

the business scenario on page 12.

26 (a) Circle the organisational structure of Filmore Pancakes.

You should only draw one circle.

Tall structure Matrix structure Flat structure

[1]

(b) Identify Beth’s span of control.

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27 Beth needed finance to start up Filmore Pancakes.

(a) What is a mortgage?

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(b) Explain how the bank might have used Filmore Pancakes’ business plan before agreeing
to the overdraft.

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28 Evaluate disadvantages to Beth of operating as a sole trader.

[12]

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29 Filmore Pancakes’ financial figures at the end of Year 1 are shown below.
• Total number of customers served: 11 400
• Total revenue: £123 120
• Total costs: £121 550
By referring to Table 1, identify:
• one objective that Filmore Pancakes has achieved
• two objectives that Filmore Pancakes has not achieved.
Give your answers in the table below. A box has been provided for your workings.
Objective that has been achieved:

Objectives that have not been achieved:

Box for workings

[3]

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30 Beth has begun to receive complaints from local residents who say that the takeaway has
increased levels of litter, noise and anti-social behaviour in the area.
Evaluate likely impacts on Filmore Pancakes of not listening to the complaints of local
residents.
[12]

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31 (a) Filmore Pancakes’ estimated costs and revenues for Year 2 are given below.
• Fixed costs (labour): £5000 per month.
• Fixed costs (other): £3400 per month.
• Variable costs (averaged): £1.00 per pancake.
• Revenue (averaged): £5.50 per pancake.
Calculate the minimum number of pancakes Filmore Pancakes needs to sell in Year 2 to
avoid making a loss.

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(b) Beth realises that to be successful Filmore Pancakes needs to attract a lot more
customers. The business’ margin of safety is far too low.
State what is meant by the term ‘margin of safety’.

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32 Analyse three social factors which might have a positive impact on Filmore Pancakes.
Which one of the three social factors would best secure the long-term success of
Filmore Pancakes? Justify your view.
[12]

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END OF QUESTION PAPER

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