AQA GCSE Business: Business location and Business planning (8132) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover sections 3.1.5 Business location and 3.1.6 Business planning of the AQA GCSE Business (8132) specification, for first teaching from September 2017. All businesses and figures are invented. Mark each answer yourself using the worked answers, then go back to the study guide for anything you missed.

Links: revision notes, the AQA GCSE Business hub, the printable checklist and the topic practice set.

Questions

1. State two factors that a business might consider when choosing where to locate. [2]

2. Define the term fixed costs and give one example. [2]

3. Dovesmere Foods sells 600 jars of chutney a month at £4.50 each. The variable cost of making each jar is £1.80. Fixed costs are £1,350 a month.

(a) Calculate the revenue. [1] (b) Calculate the total costs. [2] (c) Calculate the profit. [1]

4. Explain one way in which a business plan helps a new business to raise finance. [3]

5. A new business is preparing a business plan.

(a) Identify three sections that a business plan might contain. [3] (b) Explain how setting objectives and detailing how functions will be organised in the plan could help the owner. [4]

6. Hobbsley Print makes posters. It sells 350 posters in a month at £9 each. The variable cost of each poster (paper and ink) is £3.20 and fixed costs are £2,400 a month.

(a) Calculate the profit or loss for the month. [4] (b) The owner forecasts that sales will rise to 500 posters a month. Calculate the profit or loss at this level of sales. [3]

7. Analyse one benefit and one drawback of business planning for a business that is just starting up. [6]

8. Brambleton Pottery makes plates and bowls from clay. Most of its sales are online. It must choose between two units.

Monthly figure	Unit A: rural, beside the clay supplier	Unit B: city edge
Rent	£1,500	£2,700
Clay transport charges	£600	£150
Skilled potters living within 10 miles	2	25
Other pottery studios within 10 miles	0	3

Evaluate which unit Brambleton Pottery should choose. [9]

9. Tumbleford Tea Rooms is preparing a business plan for a bank. The owner forecasts an average spend of £8.50 per customer. The variable cost per customer is £3.10 and fixed costs are £5,200 a month.

(a) Calculate the profit or loss if the tea rooms serve 900 customers in a month. [4] (b) Calculate the profit or loss if it serves 1,200 customers in a month. [3] (c) Evaluate how useful these forecasts are to the bank in deciding whether to lend. [5]

10. Explain the difference between revenue and profit. [3]

11. Hobbsley Print’s costs include paper, unit rent, ink and business insurance.

(a) Identify the two costs that are variable. [2] (b) Explain why total costs rise when more posters are printed, even though fixed costs stay the same. [2]

Answers

1. Any two of: proximity to the market; availability of raw materials; labour; competition; costs [1] [1]. [2] Examiner insight: For a “state” question a short answer is enough, so spend your time elsewhere. The five factors named in the specification are the safest choices.

2. Fixed costs are costs that do not change as output or sales change [1]. Example: rent (or insurance) [1]. [2] Examiner insight: A definition that only says “costs that stay the same” can be too vague. Add “as output changes”. An example that is a variable cost, such as materials, cannot support the definition.

3. (a) Revenue = 600 × £4.50 = £2,700 [1] (b) Total variable costs = 600 × £1.80 = £1,080 [1]. Total costs = £1,080 + £1,350 = £2,430 [1] (c) Profit = £2,700 − £2,430 = £270 [1] Examiner insight: Show each stage. If an early figure is wrong, clear working lets the examiner see what you did and where the slip occurred. Include the £ sign.

4. A business plan includes forecasts of sales, costs and cash flow [1]. A lender can use these to judge whether the business will earn enough to repay a loan with interest [1], so the plan reduces the risk the lender sees and makes it more willing to lend [1]. [3] Examiner insight: A three-mark “explain” usually needs a point, a development and a link back to the question. A bare statement such as “banks like plans” stays at one point.

5. (a) Any three of: executive summary; business idea and objectives; target market and market research; marketing plan; operations; people; financial forecasts [1] [1] [1]. [3] (b) Objectives give the owner clear targets, such as a level of sales in the first year [1], so actual results can be compared with them and action taken if the business falls short [1]. Detailing how functions will be organised shows who is responsible for operations, marketing, finance and people [1], so tasks are not missed or duplicated, which helps the business run smoothly from the start [1]. [4] Examiner insight: The question names two items, so address both. An answer that covers only objectives leaves half of the question unanswered.

6. (a) Revenue = 350 × £9 = £3,150 [1]. Total variable costs = 350 × £3.20 = £1,120 [1]. Total costs = £1,120 + £2,400 = £3,520 [1]. Profit = £3,150 − £3,520 = −£370, so a loss of £370 [1]. [4] (b) Revenue = 500 × £9 = £4,500 [1]. Total costs = 500 × £3.20 + £2,400 = £1,600 + £2,400 = £4,000 [1]. Profit = £4,500 − £4,000 = £500 [1]. [3] Examiner insight: Say whether the result is a profit or a loss. Writing “−£370” alone is clear, but naming it a loss shows you understand the term. Fixed costs stay at £2,400 in part (b); using a higher figure would be a common slip.

7. Benefit: The plan makes the owner research the market and work out costs before spending money [1]. This can show that an idea would make a loss, so the owner can change it or stop before losing savings [1], which matters for a start-up with little money to waste [1]. Drawback: The financial figures are forecasts with no trading history behind them [1]. If sales turn out lower than predicted, the owner or a lender may rely on figures that are too optimistic [1], which could lead to cash running short in the early months [1]. [6] Examiner insight: “Analyse” asks for a chain of reasoning, not a list. State the point, then what follows from it, then why it matters to a new business. One benefit and one drawback are asked for, so choose your best of each rather than listing several.

8. Costs: Unit A costs £1,500 + £600 = £2,100. Unit B costs £2,700 + £150 = £2,850 [1]. Unit A is £750 a month cheaper [1]. Raw materials: Unit A’s closeness to the clay supplier cuts transport charges by £450 a month, a useful saving because clay is heavy [1]. Labour: Unit B has 25 skilled potters nearby against 2 at Unit A, so recruiting would be easier and quicker at B, whereas A might have to pay more or train staff [1]. Market: Most sales are online, so being near customers matters little, which weakens the case for the city edge [1]. Competition: Unit B has three other studios nearby, which could compete for the same potters and local customers, though it might also attract buyers to the area [1]. Judgement: Unit A is probably better because the lower costs and heavy raw material suit the business and customers are online [1], as long as the owner can recruit enough skilled staff [1]. The balance would shift to B if the business found it could not hire potters, because production would then be limited [1]. [9] Examiner insight: In an “evaluate” question, a judgement that follows from the data is expected, not just a list of factors. Using figures from the table, such as the £750 difference, helps to show you have applied the case.

9. (a) Revenue = 900 × £8.50 = £7,650 [1]. Total variable costs = 900 × £3.10 = £2,790 [1]. Total costs = £2,790 + £5,200 = £7,990 [1]. Profit = £7,650 − £7,990 = −£340, a loss of £340 [1]. [4] (b) Revenue = 1,200 × £8.50 = £10,200 [1]. Total costs = 1,200 × £3.10 + £5,200 = £3,720 + £5,200 = £8,920 [1]. Profit = £10,200 − £8,920 = £1,280 [1]. [3] (c) For: The forecasts show the owner has worked out costs and revenue, so the bank can see the business needs roughly 960 customers a month before it stops making a loss [1]. They show profit of £1,280 at 1,200 customers, which suggests the business can generate money to repay a loan [1]. Against: The figures are forecasts for a new business with no trading record, so the number of customers is uncertain [1]. A change in the number of customers from 900 to 1,200 moves the result from a loss to a profit, so a small shortfall in sales would matter a great deal [1]. Judgement: The forecasts are useful as a starting point, but the bank should also look at the market research behind the customer numbers before lending [1]. [5] Examiner insight: Use your own results from (a) and (b) in (c). Staying consistent with your earlier numbers makes the argument credible. A one-sided answer is weaker on an evaluate question.

10. Revenue is the income from selling goods or services, found by price × quantity sold [1]. Profit is what is left after total costs have been taken away from revenue [1]. A business can have high revenue but still make a loss if its costs are higher, for example revenue of £5,000 and total costs of £5,400 gives a loss [1]. [3] Examiner insight: A comparison needs both terms defined and the link between them. Describing only one term leaves the comparison incomplete.

11. (a) Paper [1] and ink [1]. [2] (b) Each extra poster needs more paper and ink, so total variable costs rise with output [1]. Rent and insurance do not change with output, so they stay the same, and total costs equal fixed costs plus variable costs, which therefore rise [1]. [2] Examiner insight: If the question asks for two costs, give exactly two. Listing all four, including the fixed ones, suggests you are unsure which is which.

Where marks are usually lost

• Stating a location factor without saying how it affects sales or costs.
• Picking the cheapest option in a location question and ignoring labour, market or competition.
• Not using the figures in the table when a question gives data.
• Giving only benefits of planning, or only drawbacks, when the command word is analyse or evaluate.
• Forgetting to multiply the variable cost per unit by the quantity before adding fixed costs.
• Treating fixed costs as if they change with the quantity sold.
• Giving a loss as a profit, or leaving out the £ sign.
• Ending an evaluation with a summary of the points and no judgement.
• Describing the plan’s purpose only as raising finance and leaving out setting objectives, starting up and organising functions.

Next steps

• Re-read the study guide for anything you missed.
• Condense your learning with the revision notes.
• Check the AQA GCSE Business hub and tick off the printable checklist.
• Try all the free 10-minute diagnostics.
• Book a free trial class at /trial/.

Frequently asked questions

Which AQA GCSE Business (8132) topics do these practice questions cover? Sections 3.1.5 Business location and 3.1.6 Business planning. The questions are original and are not taken from AQA papers.

How do you calculate profit from fixed and variable costs? Multiply the variable cost per unit by the quantity, add the fixed costs to get total costs, then subtract total costs from revenue (price times quantity). Say clearly whether the result is a profit or a loss.

How should I answer a 9-mark location evaluate question? Weigh several factors using the figures in the case, such as costs, labour and the market, rather than simply picking the cheapest option. End with a judgement that follows from the data.

What is the purpose of a business plan apart from raising finance? It also sets objectives and makes the owner research the market and work out costs before committing money. Describing the purpose only as raising finance is a common way to lose marks.

Official syllabus

AQA GCSE Business (8132) specification, for first teaching from September 2017, published by AQA: sections 3.1.5 Business location and 3.1.6 Business planning.