PQ

Name

Form

Teacher

SUPERVISOR’S USE ONL

Pre-Q Business Studies

2018 Specimen Paper

Paper 1 and 2: Written Questions

Total Time Allowed: 3 hours

YOU MUST HAND THIS BOOKLET TO THE SUPERVISOR AT THE END OF THE EXAMINATION.

TOTAL

Auckland Grammar School 1

Pre-Q Examination
AGS/Pre-Q/Eco/SP2/18
Question 1.

Sophie is a sole trader who runs a card production and retail business. She produces handmade,
individually designed greetings cards using job production. High quality cards are important to
Sophie’s customers. Sophie has 3 part-time employees who are paid an hourly wage rate of $16.75.
Sophie is thinking of changing from an hourly wage rate to a piece rate system, where the
employees are paid depending on the quantity of products they make. Sophie thinks this will help
to improve the motivation of her workforce. During festivals and celebrations, she receives a higher
number of orders.

a) What is meant by ‘motivation’?

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b) Identify two disadvantages to Sophie of using job production.

Disadvantage 1:____________________________________________________________________
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Disadvantage 2:____________________________________________________________________
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c) Identify and explain two advantages to Sophie of having part-time employees.

Advantage 1:______________________________________________________________________
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Explanation:_______________________________________________________________________
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Advantage 2:______________________________________________________________________
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Explanation:_______________________________________________________________________
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 d) Identify and explain two non-financial methods of motivation that Sophie could use.

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 Sophie should change the payment method she uses for her employees?
Justify your answer.

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Question 2.

JAR creates recipes and bakes bread for a mass market audience. JAR’s ranges of bread have price
elastic demand as there is a high level of competition in this market from other bakery businesses.
JAR uses a competitive pricing strategy to maintain sales revenue. The marketing manager is
thinking of changing this pricing strategy to increase sales (see Table 2). The head office of JAR is
located in Auckland, but the factory is located in Fiji. There have been complaints about
communication issues between the managers and workers. JAR has continued to grow but the
managers still have a laissez-faire leadership style.

Table 2: Forecast effect of changing price

Current price Quantity demanded Planed new price Forecast quantity demanded
$2.00 100,000 per month $1.50 150,000 per month

a) What is meant by ‘mass market’?

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b) What is meant by ‘price elastic demand’?

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 c) Identify and explain two disadvantages to JAR of business growth.

Disadvantage 1:____________________________________________________________________
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Explanation:_______________________________________________________________________
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Disadvantage 2:____________________________________________________________________
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Explanation:_______________________________________________________________________
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d) Identify and explain two ways JAR could improve communication between managers and
workers.

Way 1:___________________________________________________________________________
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Explanation:_______________________________________________________________________
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Way 2:___________________________________________________________________________
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Explanation:_______________________________________________________________________
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 e) Do you think JAR should change its pricing strategy? Justify your answer.

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 Booklet 2 of 4

BUSINESS STUDIES
PRE-Q
SAMPLE EXAMINATION PAPER 2018
Booklet 2
TIME: 3 HOURS
TOTAL MARKS: 160

Name _________________________ Form________

Teacher________________________

INSTRUCTIONS TO STUDENTS
Answer ALL questions in all four booklets
The number of marks is given in brackets [ ] at the end of each question or part question.

7
Question 3.

Honare has just left college and wants to start up her own business. She has designed a new smart
lightbulb that can be controlled from customers’ phones that will vary the colour of the light
coming out of the lightbulb, to promote sleep - NOT found in any rival products. Honare knows
obtaining finance will be difficult. She plans to have the lightbulbs produced in South East Asia. Each
lightbulb will cost $8 to produce. Honare cannot decide whether to use price skimming. She said: ‘I
have received orders for 300 lightbulbs and I have not even started promoting them’. Honare wants
to be a successful entrepreneur.

Table 1: Information on possible promotion options for Honare’s smart lightbulb.

Option 1: Set up her own Option 2: Advertise in a

website
Cost information $500 for web page to show
product specifications and
contact details
Other information For extra $750 website would
allow customers to order
online
specialist magazine
$300 for full page colour
advertisement
One of the most popular retail
lighting magazines in the
country.

a) Identify two possible sources of finance available to Honare.

Characteristic 1:____________________________________________________________________
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Characteristic 2:____________________________________________________________________
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b) Identify two possible reasons why Honare plans to produce the lightbulbs in another
country.

Reason 1:_________________________________________________________________________
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Reason 2:_________________________________________________________________________
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 c) Identify and explain two reasons why obtaining finance might be difficult for Honare’s
business.

Reason 1:_________________________________________________________________________
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Explanation:_______________________________________________________________________
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Reason 2:_________________________________________________________________________
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Explanation:_______________________________________________________________________
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d) Identify and explain one advantage and one disadvantage to Honare of using price
skimming.

Advantage:________________________________________________________________________
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Explanation:_______________________________________________________________________
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Disadvantage:_____________________________________________________________________
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Explanation:_______________________________________________________________________
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 e) Recommend which promotion option Honare should choose. Justify your answer using the
information in Table 1.

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Question 4.
Kiwiana Air is an airline business. It is in the tertiary sector. It offers low-price flights for business
customers in country J. Customers have to pay extra for luggage and food on the flight. It is a very
competitive market. The Marketing manager knows that improving customer service is important.
Bookings and advertising are done through Kiwiana Air’s ticket shops and its website. The
Marketing manager cannot decide whether to close its ticket shops and use only e-commerce.

Table 1: Selected information about two of Kiwiana Air’s routes

Average number of Average price per Break-even number of

Route passengers per flight ticket ($) passengers per flight
1 85 75 70
2 100 65 90

a) What is meant by ‘tertiary sector’?

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b) Calculate the revenue gained from an average flight on route 2.

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 c) Identify and explain two ways in which break-even information could help Kiwiana Air.

Way 1:___________________________________________________________________________
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Explanation:_______________________________________________________________________
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Way 2:___________________________________________________________________________
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Explanation:_______________________________________________________________________
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d) Identify and explain two ways in which Kiwiana Air could improve customer service.

Way 1:___________________________________________________________________________
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Explanation:_______________________________________________________________________
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Way 2:___________________________________________________________________________
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Explanation:_______________________________________________________________________
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 e) Do you think Kiwiana Air should use only e-commerce? Justify your answer.

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 Book 3 of 4

BUSINESS STUDIES
PRE-Q
SAMPLE EXAMINATION PAPER 2018
Booklet 3
TIME: 3 HOURS
TOTAL MARKS: 160

Name _________________________ Form________

Teacher________________________

INSTRUCTIONS TO STUDENTS
Answer ALL questions in all four booklets
The number of marks is given in brackets [ ] at the end of each question or part question.

14
 Countryhouse Café (CC)

When Garfield Sobers (Gary) left school he worked as a chef in several restaurants but he had
always wanted to be his own boss. He set up Countryhouse Café (CC) as a sole trader 15 years ago.
He purchased a building with $10 000 he received from his grandfather and made it into a café. It is
located in a suburban area of the capital city, in country X. Gary works very hard and is willing to take
risks. He creates his own recipes for the café and his customers like the food.
CC has been successful every year and Gary has always paid himself a high salary. However, he now
wants to increase the profit from CC by expanding the café. It is already open every day from 8am
to 8pm and in order to serve more customers he needs a larger café.
The café is located in a very busy shopping mall. Gary has undertaken some market research and
found out that 50% of his customers visit the café every day. The other 50% of customers visit less
frequently and are often attracted by the special menu items on the board outside the café.
Gary is considering two options for expansion.
Option 1:
Buy the building next door and make it into one larger café that can serve 50% more customers. The
building became empty after a clothes shop closed. The cost of the shop is $20,000 and it will cost
$10,000 for redecorating and building work.
Option 2:
Move to a new building 10 kilometres away in another part of the city. This building is twice as
large as the existing café and will cost $2,000 a year to rent as it is not for sale. Gary will be allowed
to redecorate and he will need to buy equipment for the kitchen. The total cost for this will be
$5,000. It is in a busy part of the city with many shoppers visiting the area.

Appendix 1

Daily News 23rd August 2018

The Government has forecast that interest rates will be increased later this year. This is very
worrying for many local businesses that require finance. Country X has a fast growing economy and
the Government does not want this to lead to higher inflation.
A multinational coffee shop chain wants to open cafés in malls all over country X, attracted by the
high rate of economic growth. Local businesses are worried about the competition from this
business as it benefits from economies of scale. Some market researchers think that customers will
prefer to stay with their local café and not use an international style of café.

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 Appendix 2

Three applicants for the vacancy for the chef position

Harry Sally Larry

6 years as a chef in a 10 years as a chef in a 18 years as a chef in a

small café with some large city centre high quality café in an
Experience responsibility for restaurant expensive shopping mall
managing the café

Age 25 35 40
Taking part in cooking Baking cakes and
Holidays abroad
competitions cooking
Interests

Qualifications Health and safety Qualified chef 6 IGCSEs 12 IGCSEs

qualification
Wage per hour in $5 $7 $10
previous job

Appendix 3

Cash flow forecast for CC for the second half of 2018 ($000)

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1 (a) Identify and explain two roles of marketing for the Countryhouse Café

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1 (b) Refer to Appendix 3.

(i) Calculate values for: [3]

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Y_____________________________________________________________________________
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ii) Consider whether CC is in a good financial position to expand the business. Justify your
answer.
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2 (a) Explain two characteristics which make Gary a successful entrepreneur.
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(b) Gary needs to recruit an additional chef.

Consider the advantages and disadvantages of each of the three applicants outlined in
Appendix 2. Recommend which applicant Gary should recruit. Justify your choice.

Your answer should:

• Explain the advantages and disadvantages of each candidate
• Make a justified recommendation of your choice of candidate.

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______________________________________________________________________________
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 Book 4 of 4

BUSINESS STUDIES
PRE-Q
SAMPLE EXAMINATION PAPER 2018
Booklet 4
TIME: 3 HOURS
TOTAL MARKS: 160

Name _________________________ Form________

Teacher________________________

INSTRUCTIONS TO STUDENTS
Answer ALL questions in all four booklets
The number of marks is given in brackets [ ] at the end of each question or part question.

22
3 (a) Identify and explain two reasons why quality is important for CC.

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(b) Gary has three sources of finance available for the potential expansion:
• utilising a bank loan
• changing the legal structure of the business to a partnership and
• selling some of his business assets.
Comment on all sources. Consider which of the three sources of finance that Gary could use for
expansion. Recommend and justify which source of finance CC should choose.

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___________________________________________________________________________
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4 (a) Identify two possible stakeholder groups for CC. Explain an objective of each stakeholder group
you have identified.

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(b) Consider the advantages and disadvantages of each of the two options for expanding the
business. Recommend which option Gary should choose. Justify your answer.
In your answer:

• State your option.

• Explain the advantages and disadvantages of each option.
• Recommend which option Gary should choose and justify your answer.

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