Cambridge O Level

BUSINESS STUDIES 7115/11

*5897975677*

Paper 1 Short Answer and Data Response May/June 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
• Answer all questions.
• Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
• Write your name, centre number and candidate number in the boxes at the top of the page.
• Write your answer to each question in the space provided.
• Do not use an erasable pen or correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 80.
• The number of marks for each question or part question is shown in brackets [ ].

This document has 12 pages. Any blank pages are indicated.

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1 Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys
and candy (sweets). When Pamela started her business 30 years ago she had no help to manage
the shop. She now has 5 employees. Pamela knows maintaining customer loyalty is important.
She uses competitive pricing. Most of her marketing budget is spent on sales promotion. Pamela
does not use e-commerce.

(a) Define ‘competitive pricing’.

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(b) Define ‘marketing budget’.

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(c) Outline two possible threats to Pamela’s business of using e-commerce.

Threat 1: ...........................................................................................................................

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Threat 2: ...........................................................................................................................

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(d) Explain two methods Pamela’s business can use to maintain customer loyalty.

Method 1: ..........................................................................................................................

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Explanation: ......................................................................................................................

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Method 2: ..........................................................................................................................

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Explanation: ......................................................................................................................

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(e) Do you think being a risk-taker is a more important characteristic of a successful entrepreneur
than being creative? Justify your answer.

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2 CTF is a public limited company. It manufactures beds using batch production. The Operations
Director is using break-even analysis to calculate the margin of safety for children’s beds. An extract
from CTF’s output data is shown in Table 2.1. The Operations Director wants to know how an
increase in inflation might affect CTF. She knows there are many environmental pressures that a
manufacturing business could respond to.

Table 2.1
Extract from CTF’s output data (children’s beds per month)

Break-even output 14 000

Current level of output 18 000

Maximum factory output 25 000

(a) Define ‘public limited company’.

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(b) Calculate the margin of safety for CTF’s children’s beds. Show your working.

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(c) Outline two ways an increase in inflation might affect CTF.

Way 1: ...............................................................................................................................

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Way 2: ...............................................................................................................................

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(d) Explain two possible advantages to CTF of using batch production.

Advantage 1: ....................................................................................................................

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Explanation: ......................................................................................................................

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Advantage 2: ....................................................................................................................

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Explanation: ......................................................................................................................

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(e) Do you think manufacturing businesses should always respond to environmental pressures?
Justify your answer.

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3 VCG manufactures high-quality briefcases and travel bags. VCG has 50 skilled production workers
in its factory. VCG is planning to expand by building a second factory. Different locations are being
considered. The Managing Director is reviewing VCG’s financial statements. An extract is shown
in Table 3.1. Both internal and external stakeholder groups of VCG are interested in this information.

Table 3.1
Extract from VCG’s 2021 financial statements ($)

Revenue 2 000 000

Current assets 300 000

Current liabilities 250 000

Shareholders’ equity (funds) 800 000

(a) Define ‘shareholders’ equity’.

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(b) Identify two financial statements a public limited company is legally required to publish each
year.

Financial statement 1: ......................................................................................................

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Financial statement 2: ......................................................................................................

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(c) State whether each of the following are classified as a current asset or a current liability.

Overdraft: ..........................................................................................................................

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Trade receivables: ............................................................................................................

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Trade payables: ................................................................................................................

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Cash in bank: ....................................................................................................................

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(d) Explain one way each of the following stakeholder groups might use VCG’s accounts:

Shareholders: ...................................................................................................................

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Explanation: ......................................................................................................................

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Suppliers: ..........................................................................................................................

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Explanation: ......................................................................................................................

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(e) Do you think access to labour is the most important factor for a manufacturing business to
consider when deciding where to locate a new factory? Justify your answer.

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4 MBH is a business organisation in the public sector. It controls 5 hospitals and has 5600 employees
including 440 doctors. External recruitment is used when recruiting skilled employees. The Human
Resources Director uses ideas from Herzberg’s theory to improve employee motivation. He is
worried about communication barriers within MBH. The business has a tall organisational structure
and a long chain of command. Most of MBH’s internal communication is by email and phone calls.

(a) Identify two objectives for a business organisation in the public sector.

Objective 1: .......................................................................................................................

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(b) Define ‘chain of command’.

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(c) Outline two ways MBH can use ideas from Herzberg’s theory to motivate its employees.

Way 1: ...............................................................................................................................

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(d) Explain how MBH might reduce or remove each of the following communication barriers:

Messages lost: ..................................................................................................................

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Explanation: ......................................................................................................................

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Use of jargon: ...................................................................................................................

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Explanation: ......................................................................................................................

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(e) Do you think an organisation should always use external recruitment when recruiting skilled
employees? Justify your answer.

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