2020 Business IGCSE - All Paper 2 - New Syllabus

2
Bright Windows (BW)
Bob recently set up BW, a window washing business after he had been unemployed for 7 months.
Many home owners are extremely busy and find it difficult to find the time to wash the windows in
their houses. Increasing incomes have also led to a high demand for window washing services.
The primary market research carried out by Bob before setting up his business confirmed this high
demand. Bob used sampling when carrying out a questionnaire.
Bob is a sole trader. He invested $2 000 to get his business started and to provide working capital.
He needed $250 to purchase ladders, buckets and cleaning products. He also needed transport
to travel between customers houses. Bob decided to lease a van at a cost of $150 per month. Bob
has to pay wages to his 2 part-time employees of $300 per month each.
Bob only has a few regular customers and he needs to promote the business to attract more
customers. He is considering printing leaflets, advertising in local newspapers or just relying on
social media. He has to decide which method of promotion to use. He hopes his regular customers
will tell their friends about BW’s excellent services. If the promotion is successful he will need to
ensure his employees can meet this higher demand.
Appendix 1
Text message from one BW employee to another BW employee
10:44
Employee 1 >
I like working with Bob,

he is a good boss. I am
happy he asks us what
we think. I do not want
to work for anyone else
but I would like to work
more hours.
Employee 2:
My last employer
always told me what to
do. I do not like having
to make decisions.
Working fewer hours
and being flexible with
the times I work makes
it easier to look after
my family.
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Appendix 2
Summary of costs, price and demand for BW
Fixed cost per month $1250
Variable cost per house cleaned $1
Price per house $11
Average number of customers per month 225
Appendix 3
Article in the national newspaper
Main News 10 February 2020
Should window washing become more environmentally friendly?
The most effective products used to wash windows contain chemicals which damage the
environment. However, these products reduce the time taken to wash windows by 50%.
Many window washing businesses use plastic bottles as containers for all their cleaning products.
Most of these bottles cannot be refilled or recycled.
Washing windows can use a lot of water which reduces the amount of water available for other
uses. Recently a new machine has been developed for washing windows which is very efficient
and recycles the water it uses. Each machine costs $1000.
The Government is being encouraged by environmental pressure groups to introduce legal controls
over the window washing industry.
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1 (a) Explain four reasons why a person may set up their own business.
Reason 1: .........................................................................................................................
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(b) Explain the benefits to BW of employing part-time employees and full-time employees. Do you
think Bob should continue to employ only part-time employees? Justify your answer.
Part-time employees: ........................................................................................................
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2 (a) Explain two reasons why Bob used sampling when carrying out a questionnaire.
Reason 1: .........................................................................................................................
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Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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(b) Explain the following three methods of promotion BW could use. Which method should Bob
use? Justify your answer.
• Leaflets
• Advertise in local newspaper
• Social media
Leaflets: ............................................................................................................................
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Advertise in local newspaper: ...........................................................................................
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Social media:.....................................................................................................................
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Recommendation: ............................................................................................................
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3 (a) Explain two reasons why working capital is important to BW.
Reason 1: .........................................................................................................................
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Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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(b) Consider the three main styles of leadership Bob could use in his business. Which leadership
style do you think he should use? Justify your answer.
Leadership style 1: ...........................................................................................................
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Recommendation: ............................................................................................................
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4 (a) (i) Calculate the break-even level of output for BW using the information in Appendix 2.
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(ii) Calculate the margin of safety for BW using the information in Appendix 2.
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(iii) Identify four ways break-even analysis can be useful to a business.
Way 1: ...................................................................................................................
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(b) Consider the following three options for BW. Which option should Bob choose to improve
BW’s reputation? Justify your answer.
Option 1: Use cleaning products that contain chemicals

Option 2: Use bottles that can be refilled with cleaning products
Option 3: Purchase a new window washing machine
Option 1: ...........................................................................................................................
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Option 2: ...........................................................................................................................
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Option 3: ...........................................................................................................................
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Recommendation: ............................................................................................................
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Freshfruit Juicebar (FJ)
Simon set up FJ in country Z. It makes fresh fruit drinks. Simon had a well paid job with a large
food and drinks company but he wanted to create his own business. He left his job 6 months ago
to set up FJ. Simon wants to provide people with a healthy alternative to the mass produced drinks
that are available in most shops.
Simon is willing to work hard to make FJ a success. He has lots of ideas for new drinks. He has
been making the drinks at his house and selling them at a market stall. He does not have enough
space to produce a higher output on his own. The first drinks FJ produced were made from just 2
types of fruit to keep costs down. The business has been profitable. Simon now wants to expand
the business rapidly and he needs to raise $100 000 to open a factory. He will need to recruit
production workers. He is considering using crowd-funding instead of a bank loan to raise the
necessary finance.
Simon wants to produce a new type of drink. He has carried out market research using three
methods to help him decide which fruit drink to produce and what price to charge. He has estimated
demand, costs and prices for two possible new drinks, as outlined in Appendix 3. He must decide
which one FJ should produce.
Simon plans to open more fruit drink market stalls in busy areas of the city. He needs to recruit a
manager to operate all of FJ’s drink stalls. This person will need to be reliable and able to make
their own decisions. Simon may have to pay to train the new manager. If these market stalls are
successful, Simon can start opening market stalls in other cities.
Appendix 1
Main News - 12 May 2020
The Government in country Z wants to promote healthy eating and drinking to make people more
productive at work and also live longer. The Government plans to spend more money on providing
information about healthy food and drinks. It hopes that this will encourage people to think about
what they are eating and drinking.
The Government is also worried about slow economic growth. It has recently increased government
spending on improving public transport and paying higher wages to public sector employees.
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Appendix 2
Three applicants for the position of manager of the fruit drink market stalls
Joe Zabeen Jim
Expected wage
$6 per hour $15 per hour $10 per hour
rate
4 years part-time work in a 15 years as an 6 years working as a

Experience café when studying for a assistant manager of a manager in a restaurant in
degree large shop in a mall the city centre
3 A levels, Degree 5 IGCSEs
Qualifications Hygiene certificate (required No qualifications Hygiene certificate (required

if working with food and if working with food and
drinks) drinks)
Reason for Long hours of work with few Wants to gain a Wants more of a challenge
changing job holidays promotion at work
Appendix 3
Information on two possible new fruit drinks.

Drink A Drink B
Forecast weekly demand 2 000 5 000
Average variable cost of fruit $4.00 $1.00
Fixed costs per week $500 $500
Selling price $5.00 $2.00
Number of types of fruit used 6 2
Likely market segment High income consumers Low income consumers
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1 (a) Explain four characteristics that make Simon a successful entrepreneur.
Characteristic 1: ................................................................................................................
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Characteristic 2: ................................................................................................................
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Characteristic 3: ................................................................................................................
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Characteristic 4: ................................................................................................................
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(b) Explain the three main methods of production FJ could use to produce its products in the
factory. Which method should FJ use? Justify your answer.
Method 1: ..........................................................................................................................
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Method 2: ..........................................................................................................................
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Method 3: ..........................................................................................................................
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Recommendation: ............................................................................................................
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2 (a) Explain one advantage and one disadvantage to Simon of using crowd-funding as a source
of finance for FJ.
Advantage: .......................................................................................................................
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Disadvantage: ...................................................................................................................
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(b) Consider the following three methods of market research Simon used. Which do you think is
the best method to use when deciding which product to produce? Justify your answer.
• Online questionnaire
• Accessing government population data
• Focus group
Online questionnaire: ........................................................................................................
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Accessing government population data: ..........................................................................
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Focus group: .....................................................................................................................
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Conclusion: .......................................................................................................................
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3 (a) Explain four ways an increase in government spending may affect a business.
Way 1: ...............................................................................................................................
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(b) Referring to Appendix 2, consider the suitability of the three applicants for the position of
manager. Which applicant should Simon select? Justify your answer.
Joe: ...................................................................................................................................
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Zabeen:.............................................................................................................................
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Jim: ...................................................................................................................................
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4 (a) Explain two reasons why profit is important to FJ.
Reason 1: .........................................................................................................................
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Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
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(b) Consider the two products outlined in Appendix 3. Which product should FJ produce? Justify
your answer using relevant calculations.
Drink A: .............................................................................................................................
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Drink B:..............................................................................................................................
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Recommendation:.............................................................................................................
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Eco Scooters (ES)
ES makes scooters (small motorcycles) which are sold in country Z. ES is a public limited company
which was founded 40 years ago. It has grown by taking over other smaller scooter manufacturers.
This meant that ES could use the factories and skilled employees of these other businesses. ES
is now planning to take over another scooter manufacturing business based in country Z, either
company ABC or company FGH. Financial information about these companies is shown in Appendix
1.
Currently ES uses a flow production method with many workers and only a few machines. The
work is boring and employees have to work long hours doing the same job. However, wages are
calculated by using time rate and this is higher than the legal minimum wage. There are no other
financial rewards for the workers.
ES currently has 30% market share in country Z. It is planning to export its products and has drawn
up a business plan for this expansion. This plan includes the promotion methods ES is considering
for its scooters in export markets. To start exporting, ES will have to increase production. It needs
to recruit 100 additional production workers and invest $10m in new technology production
machinery. This should ensure higher output as well as higher productivity.
Appendix 1
Financial information (2019) for the two companies ES is planning to take over.
ABC Company FGH Company
Revenue $100m $400m
Cost of sales $50m $160m
Expenses $40m $210m
Return on Capital Employed

20% 25%
(ROCE)
Current ratio 2 3
Acid test ratio 1 1.5
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Appendix 2
Article in the national newspaper
Main News 10 April 2020
The economy of country Z has grown rapidly over the last 5 years and incomes are high. This has
resulted in inflation. The Government is now taking action to stop inflation rising any further.
Unemployment has now started to increase. This has been welcomed by some businesses but not
all. The demand for luxury products is likely to fall if unemployment continues to rise.
Appendix 3
Email to Managing Director
To: Managing Director

From: Finance Director
Date: 20 April 2020
Re: New laws
The Government has introduced many new laws that will have an impact on ES. These legal controls
include those affecting consumer protection, location decisions and environmental protection. We
will have to consider how each of these new laws will affect our costs and operations.
Please make sure you have carried out a full analysis of what these changes will mean for ES.
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1 (a) Explain one benefit and one problem for ES of taking over other businesses.
Benefit: .............................................................................................................................
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(b) Consider the financial information in Appendix 1. Which company should ES take over? Justify
your answer using appropriate ratios.
ABC Company: .................................................................................................................
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FGH Company: .................................................................................................................
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Recommendation: ............................................................................................................
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2 (a) Explain four ways a business plan can be useful.
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(b) ES has been considering the following three methods of promotion for its products in export
markets. Which method should ES choose? Justify your answer.
• Advertise on national television

• Advertise on ES website
• Display its products in shopping malls
Advertise on national television:........................................................................................
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Advertise on ES website:...................................................................................................
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3 (a) Explain two benefits to ES of higher productivity.
Benefit 1: ..........................................................................................................................
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Explanation:.......................................................................................................................
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Benefit 2: ..........................................................................................................................
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(b) Consider three methods of motivation ES could use for its production workers. Which is the
best method for ES to choose? Justify your answer.
Method 1: ..........................................................................................................................
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Method 2: ..........................................................................................................................
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4 (a) Explain how the following four legal controls may affect ES.
• Control over misleading promotion

• Control over faulty products
• Control over location decisions
• Control over pollution
Misleading promotion:.......................................................................................................
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Faulty products: ................................................................................................................
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Location: ...........................................................................................................................
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(b) Consider the effect on ES of the following two economic changes in country Z. Which change
is likely to have the biggest effect on ES’s profit? Justify your answer.
• Increasing unemployment
• Increasing inflation
Increasing unemployment: ...............................................................................................
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Increasing inflation: ...........................................................................................................
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Conclusion: .......................................................................................................................
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Excel Cars (EC)
EC has a good reputation for making quality cars. It is a public limited company based in country
Z. EC sells cars in both the domestic and export markets. It makes a range of petrol and diesel
cars. EC is now planning to start producing electric cars.
EC employs 2 000 skilled employees in its factory. The company has a tall organisational structure.
Senior managers often complain they have too many tasks to do. Recently senior managers have
been delegating more tasks to junior managers.
Most models of EC cars have high sales. However, market research information suggests that
customers are changing to buying more environmentally friendly cars which do less harm to air
quality. Sales of diesel cars are forecast to fall. EC may need to change production methods to
start producing new models of cars.
If EC start to produce an electric car model an investment of $200m will be needed for research
and development. All existing production employees will need to be retrained to operate new
technology.
The Operations Director is considering opening a factory in one of EC’s main export markets. He
must choose between country A and country B. Information about these countries is given in
Appendix 3.
Appendix 1
To: Managing Director

From Marketing Director
Date: 10 April 2020
Re: Changing customer needs
We should launch a new model of car next year following the results of our market research. The
markets for petrol and diesel cars are becoming more competitive. Several new car companies
have entered these markets with new models. We need to keep our costs down and we may also
need to consider importing cheaper components for cars. However, the Government of country Z
has increased import tariffs on components for cars and on imported cars.
We already know that the price of most electric cars is much higher than the prices of most petrol
and diesel cars. The market research identified a gap in the market for lower priced electric cars.
The Government is giving grants to new and existing businesses to develop electric cars so that
air pollution can be reduced in country Z. The Government is also providing support for business
start-ups because incomes are low and unemployment is high.
EC has an opportunity to take advantage of customers wanting to buy products that do not harm
the environment. Some customers may be willing to pay higher prices for electric cars than for
petrol or diesel cars because customers feel electric cars are better for the planet.
© UCLES 2020 06_0450_23_2020_1.9

3
Appendix 2
Information about two electric car models EC could produce
Electric car model 1 Electric car model 2
Selling price $20 000 $40 000
Fixed cost per month $4 000 000 $4 000 000
Variable cost per car $15 000 $20 000
Forecast sales per month 1 000 500
Appendix 3
Information about country A and country B
Country A Country B
Wage rates High Low
Skills of workers High skilled – well trained Low skilled – had little or no training
Large market for global car producers Low income country with low sales of
Car market with high sales of cars but not cars but rising incomes will lead to
increasing higher demand
Car manufacturers Many car manufacturers with many

No car manufacturers or suppliers
located in the country component suppliers
Very good road network but traffic Improving road network with little
Road network
congestion is a problem traffic congestion
© UCLES 2020 06_0450_23_2020_1.9

2
1 (a) Explain four reasons why governments support business start-ups.
Reason 1: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Reason 3: .........................................................................................................................
...........................................................................................................................................
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Reason 4:..........................................................................................................................
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........................................................................................................................................... [8]
© UCLES 2020 06_0450_23_2020_1.9

3
(b) Explain the benefits and limitations to EC of using on-the-job training and off-the-job training.
Which method of training should EC use when changing production methods? Justify your
answer.
On-the-job training:............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Off-the-job training:............................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
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Recommendation:.............................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [12]
© UCLES 2020 06_0450_23_2020_1.9 [Turn over

4
2 (a) Explain one advantage and one disadvantage for EC’s senior managers when they delegate
tasks.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [8]
© UCLES 2020 06_0450_23_2020_1.9

5
(b) Consider how the following two changes in the market are likely to affect EC:
• Change in customer spending patterns away from diesel cars to electric cars
• Markets for petrol and diesel cars are becoming more competitive
Which change is likely to have the most effect on EC’s profit? Justify your answer.
Change in customer spending patterns away from diesel cars to electric cars: ...............
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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Markets for petrol and diesel cars are becoming more competitive:.................................
...........................................................................................................................................
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Conclusion: .......................................................................................................................
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........................................................................................................................................... [12]
© UCLES 2020 06_0450_23_2020_1.9 [Turn over

6
3 (a) Explain four sources of finance that EC could use for the investment in the new product.
Source 1: ..........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Source 2: ..........................................................................................................................
...........................................................................................................................................
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Source 3: ..........................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
Source 4: ..........................................................................................................................
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........................................................................................................................................... [8]
© UCLES 2020 06_0450_23_2020_1.9

7
(b) Consider the information for the two car models outlined in Appendix 2. Which car model
should EC start producing? Justify your answer using break-even calculations.
Model 1: ............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Model 2: ............................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
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Recommendation: ............................................................................................................
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© UCLES 2020 06_0450_23_2020_1.9 [Turn over

8
4 (a) Explain two ways import tariffs might affect EC.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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........................................................................................................................................... [8]
© UCLES 2020 06_0450_23_2020_1.9

9
(b) Using Appendix 3, consider the advantages and disadvantages of locating EC’s new factory
in country A and country B. Which country should EC choose? Justify your answer.
Country A: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Country B: .........................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
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Recommendation: ............................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
© UCLES 2020 06_0450_23_2020_1.9

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2

Bright Windows (BW)

Text message from one BW employee to another BW employee

I like working with Bob,

© UCLES 2020 03_0450_22_2020_1.11

Summary of costs, price and demand for BW

Fixed cost per month $1250

Variable cost per house cleaned $1

Price per house $11

Average number of customers per month 225

Article in the national newspaper

Main News 10 February 2020

Should window washing become more environmentally friendly?

© UCLES 2020 03_0450_22_2020_1.11

© UCLES 2020 03_0450_22_2020_1.11

Part-time employees: ........................................................................................................

Full-time employees: ........................................................................................................

© UCLES 2020 03_0450_22_2020_1.11 [Turn over

© UCLES 2020 03_0450_22_2020_1.11

Advertise in local newspaper: ...........................................................................................

© UCLES 2020 03_0450_22_2020_1.11 [Turn over

3 (a) Explain two reasons why working capital is important to BW.

© UCLES 2020 03_0450_22_2020_1.11

Leadership style 1: ...........................................................................................................

Leadership style 2: ...........................................................................................................

Leadership style 3: ...........................................................................................................

© UCLES 2020 03_0450_22_2020_1.11 [Turn over

(iii) Identify four ways break-even analysis can be useful to a business.

© UCLES 2020 03_0450_22_2020_1.11

Option 1: Use cleaning products that contain chemicals

© UCLES 2020 03_0450_22_2020_1.11

Freshfruit Juicebar (FJ)

Main News - 12 May 2020

© UCLES 2020 06_0450_21_2020_1.8

Joe Zabeen Jim

4 years part-time work in a 15 years as an 6 years working as a

3 A levels, Degree 5 IGCSEs

Qualifications Hygiene certificate (required No qualifications Hygiene certificate (required

Information on two possible new fruit drinks.

Forecast weekly demand 2 000 5 000

Average variable cost of fruit $4.00 $1.00

Fixed costs per week $500 $500

Selling price $5.00 $2.00

Number of types of fruit used 6 2

Likely market segment High income consumers Low income consumers

© UCLES 2020 06_0450_21_2020_1.8

1 (a) Explain four characteristics that make Simon a successful entrepreneur.

© UCLES 2020 06_0450_21_2020_1.8

© UCLES 2020 06_0450_21_2020_1.8 [Turn over

© UCLES 2020 06_0450_21_2020_1.8

Online questionnaire: ........................................................................................................

Accessing government population data: ..........................................................................

Focus group: .....................................................................................................................

© UCLES 2020 06_0450_21_2020_1.8 [Turn over

© UCLES 2020 06_0450_21_2020_1.8

© UCLES 2020 06_0450_21_2020_1.8 [Turn over

4 (a) Explain two reasons why profit is important to FJ.

© UCLES 2020 06_0450_21_2020_1.8

© UCLES 2020 06_0450_21_2020_1.8

Eco Scooters (ES)

ABC Company FGH Company

Revenue $100m $400m

Cost of sales $50m $160m

Expenses $40m $210m