A Level Business: Location and scale (Cambridge 9609) – 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.

This set covers section 9.1 Location and scale (9.1.1 and 9.1.2) of the Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028, which is A Level content in Topic 9, Operations management. All businesses and figures are invented, and money amounts are in dollars. Read the study guide or the revision notes first. More Topic 9 questions are in the Topic 9 practice set. Course links: the Cambridge A Level Business hub, the checklist and the free diagnostics.

Questions

1. Define offshoring. [2]

2. A chain of bakeries is choosing where to open a new shop. Identify two factors, other than the cost of labour, that it should consider. [2]

3. Explain two reasons why an international location decision is more complex than a local one. [4]

4. Anselby Furniture makes 20,000 chairs a year. At its local site, fixed costs are 150,000 a year and variable cost is 22 per chair. At a site in another country, fixed costs are 190,000 a year, variable cost is 15 per chair, and shipping adds 3.50 per chair. Calculate the total cost and the unit cost at each site and state which is cheaper. [5]

5. Explain one reason why a business might bring production back to its home country (reshoring) and one effect this could have on the business. [4]

6. Explain one internal economy of scale that a large food manufacturer might gain. [3]

7. Distinguish between an internal economy of scale and an external economy of scale. Give an example of each. [4]

8. Halbury Plastics makes crates. Total cost is 45,000 at 5,000 crates, 70,000 at 10,000 crates and 160,000 at 20,000 crates. (a) Calculate the unit cost at each output. [3] (b) Calculate the percentage change in unit cost when output rises from 10,000 to 20,000 crates, to 1 decimal place. [2] (c) Explain one possible cause of the change in (b). [2]

9. Explain two factors that might keep a hair salon small in scale. [4]

10. Meadowquay Cycles builds bicycles for its home market. Analyse two ways in which globalisation could affect where it chooses to make its bicycles. [6]

11. Glenwhistle Electronics assembles 60,000 units a year at a plant abroad. Unit variable costs are: labour 3.20, components 14.00, shipping and duty 2.10, and extra stock holding 0.90. Fixed costs are 420,000 a year. Wages abroad have now risen by 50%. The directors are considering moving assembly back home, where labour would be 5.60 per unit, components 14.00 and delivery 0.40, with fixed costs of 480,000 a year and a one-off cost of 300,000 to build the new plant. Customers say they want faster delivery. (a) Calculate the unit cost at the overseas plant after the wage rise. [3] (b) Calculate the unit cost at the home plant. [2] (c) Evaluate whether Glenwhistle should reshore. [7]

12. Tolmere Bakeries has this unit cost data: 0.82 at 20,000 loaves a week, 0.64 at 40,000, 0.58 at 60,000, 0.61 at 80,000 and 0.69 at 100,000. The owner wants to expand output from 60,000 to 100,000 loaves a week. (a) State the output with the lowest unit cost. [1] (b) Calculate the percentage change in unit cost from 60,000 to 100,000 loaves, to 1 decimal place. [2] (c) Evaluate whether the owner should expand to 100,000 loaves. [5]

Answers

1. Offshoring is moving some or all of a business’s operations (production or services) [1] to another country, whether to its own overseas site or to a supplier abroad [1]. [2] Examiner insight: a definition tends to need both moving operations and another country. “Using cheap labour abroad” describes a motive, not the meaning.

2. Closeness to customers or footfall [1]; rent or cost of premises [1]. (Also valid: transport links, competitors nearby.) [2] Examiner insight: “identify” asks for a short statement only; explanation adds nothing, and repeating labour, which the question rules out, earns nothing.

3. First reason: different currencies [1], so costs and revenues move with exchange rates, which adds uncertainty to the cost comparison [1]. Second reason: different laws, languages and customs, or longer supply chains [1], so contracts, standards and delivery times are harder to manage and delays more likely [1]. [4] Examiner insight: each reason needs a development to earn the second mark. A list of “currency, law, language” with no consequence for the business usually earns the identification marks only.

4. Local: variable cost = 22 × 20,000 = 440,000, so total cost = 440,000 + 150,000 = 590,000 [1]; unit cost = 590,000 ÷ 20,000 = 29.50 [1]. Overseas: variable cost per chair = 15 + 3.50 = 18.50, so total = 18.50 × 20,000 + 190,000 = 560,000 [1]; unit cost = 560,000 ÷ 20,000 = 28.00 [1]. The overseas site is cheaper by 1.50 per chair [1]. [5] Examiner insight: shipping is part of the overseas cost; leaving it out gives a wrong comparison, and shown working lets a slip be recognised.

5. Reason: wages abroad have risen, so the cost advantage of offshoring has shrunk (or: long lead times and quality problems abroad) [1], and bringing production home may now cost little more or even less [1]. Effect: shorter delivery times, so the business can respond faster to customers [1], although it may face the cost of building or fitting out a plant at home [1]. [4] Examiner insight: the reason should be one that arises from being abroad. “Cheaper labour at home” would be an offshoring-style argument and is unlikely to fit.

6. Purchasing economy: a large manufacturer buys ingredients in bulk [1], so suppliers give discounts per tonne [1], which lowers the cost of each unit it produces [1]. (Technical, financial, marketing or managerial economies also fit.) [3] Examiner insight: the final link to lower unit cost is what separates a described advantage from an economy of scale.

7. An internal economy is a fall in unit cost caused by the growth of the firm itself [1]; for example, bulk-buying discounts as it orders more [1]. An external economy is a fall in unit cost caused by the growth of the industry or area, benefiting all firms in it [1]; for example, a local college that trains skilled workers for all the firms nearby [1]. [4] Examiner insight: the distinction turns on the source of the saving (the firm or the industry); examples should make that source clear.

8. (a) 45,000 ÷ 5,000 = 9.00 [1]; 70,000 ÷ 10,000 = 7.00 [1]; 160,000 ÷ 20,000 = 8.00 [1]. (b) (8 − 7) ÷ 7 × 100 [1] = +14.3% [1]. (c) Output doubled, but communication and coordination across a larger workforce became harder [1], so total cost rose faster than output, which is a diseconomy of scale [1]. (Lower motivation also fits.) [7] Examiner insight: state the direction as well as the size in (b); a rise should be shown as positive. In (c), name the diseconomy and link it to unit cost.

9. Factor 1: the product is a personal service [1], so each stylist can serve only a few customers a day, which limits growth without hiring more [1]. Factor 2: the owner may prefer control and a quiet life over growth [1], so would not take on the finance or management load of a bigger salon [1]. (Also valid: small local market, limited finance.) [4] Examiner insight: “explain two” needs two distinct factors, each applied to a salon rather than to business in general.

10. First way: lower trade barriers and cheaper transport [1] mean Meadowquay could make frames or whole bicycles abroad where labour is cheaper and ship them home at a competitive cost [1]. Second way: overseas rivals can sell into its home market at lower prices [1], which pressures Meadowquay to cut costs, possibly by offshoring or by moving to a cheaper site [1]. Emerging markets also offer new customers, so a site nearer them could appeal [1], though rising wages abroad or shipping disruption could weaken the case [1]. [6] Examiner insight: analysis is a chain of cause and effect for the business named; stating a trend and jumping to a conclusion leaves the chain incomplete.

11. (a) Wage abroad = 3.20 × 1.5 = 4.80. Variable cost = 4.80 + 14.00 + 2.10 + 0.90 = 21.80 [1]. Total cost = 21.80 × 60,000 + 420,000 = 1,728,000 [1]. Unit cost = 28.80 [1]. (b) Variable cost = 5.60 + 14.00 + 0.40 = 20.00 [1]. Total = 20.00 × 60,000 + 480,000 = 1,680,000, so unit cost = 28.00 [1]. (c) For: home unit cost is 0.80 lower, a saving of 48,000 a year [1]. Faster delivery meets what customers want and less stock needs to be held [1]. Less exposure to exchange rates, shipping disruption and further wage rises abroad [1]. Against: the one-off 300,000 takes 300,000 ÷ 48,000 = 6.25 years to recover [1], a long period if the market changes. The saving is small (under 3% of unit cost) and home labour cost could rise [1]. Staying keeps the existing set-up, avoiding disruption [1]. Judgement: reshoring is justified only if faster delivery wins or protects sales worth more than the 6.25-year payback implies, since cost alone gives a thin case [1]. [12] Examiner insight: an evaluate answer needs the calculated figures used as evidence, a balance of both sides, and a final decision with a reason; recalculating (a) and (b) without using them in (c) tends to leave the judgement unsupported.

12. (a) 60,000 loaves (0.58) [1]. (b) (0.69 − 0.58) ÷ 0.58 × 100 [1] = +19.0% [1]. (c) Unit cost rises beyond 60,000, so expansion brings diseconomies of scale, perhaps from communication or coordination problems [1]. Total cost rises from 34,800 to 69,000, a rise of 98.3% for a 66.7% rise in output [1]. Against this, extra sales could raise revenue and market share if demand exists, and profit depends on the selling price relative to 0.69 [1]. Judgement: expand only if the price and demand justify it and managers can offset the diseconomies; otherwise stay near 60,000 [1]. One further point of balance: a gradual step to 80,000, where unit cost is 0.61, would test demand at lower cost risk [1]. [8] Examiner insight: using the figures in the table strengthens an evaluation. A bare “it depends” with no reason for what it depends on tends to be treated as a weak judgement.

Where marks are usually lost

• Defining offshoring as outsourcing, or giving only a motive such as cheap labour.
• Leaving shipping, duty or stock costs out of an overseas cost comparison.
• Calling a saving an internal economy when the cause is the industry or area.
• Giving a percentage change without a sign or direction, or dividing by the new figure instead of the old.
• Evaluating with no judgement, or one not tied to the numbers.

Next steps

• Review the revision notes and the study guide.
• Go to the Cambridge A Level Business hub and the checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

Which section of Cambridge AS and A Level Business 9609 do these questions cover? Section 9.1 Location and scale (9.1.1 and 9.1.2), including location decisions, offshoring and reshoring, and economies and diseconomies of scale.

What is often left out of an overseas cost comparison? Shipping, duty and inventory costs. Leave them out and the comparison between a home and an overseas site will be wrong.

How should a percentage change in unit cost be written? Divide the change by the original figure, multiply by 100, and state the direction, such as a rise or a fall. Dividing by the new figure is a common error.

What does an evaluate question on location need? Use the calculated figures as evidence, weigh financial and non-financial factors, and reach a judgement tied to the numbers.

Official syllabus

Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment (Cambridge International Education), section 9.1.