IGCSE Business: Production of goods and services (Cambridge 0264) – 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 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 section 4.1, Production of goods and services, of the Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029. Revise first with the study guide and the revision notes. The course hub and the printable checklist track your progress. Not sure where to start? Try the free diagnostics.

Questions

1. State two reasons why businesses hold inventory. [2]

2. Redmarle Lighting made 7,560 lamps with 27 employees in March. In April it made 7,200 lamps with 24 employees.

(a) Calculate labour productivity in March. [2] (b) Calculate the percentage change in labour productivity from March to April. Give your answer to one decimal place. [3]

3. Explain two reasons why efficiency is important for a business. [4]

4. Hollinside Tiles pays each worker £600 a week. At present 30 workers make 9,000 tiles a week. Demand has risen to 11,700 tiles a week. The owner is considering two options.

Option A: buy an automated pressing machine for £240,000. Only 26 workers would then be needed to make 11,700 tiles a week. Option B: spend £9,000 on training, which would raise output to 340 tiles per worker per week. All 30 workers would stay.

(a) Calculate labour productivity at present and under option A. [2] (b) Calculate the labour cost per tile at present and under option A. Give each answer to the nearest penny. [2] (c) Evaluate which option Hollinside Tiles should choose. [6]

5. Thurlstone Biscuits holds a short meeting every week where factory staff suggest small changes to the way biscuits are made and packed.

(a) Define the term Kaizen. [2] (b) Explain one way Kaizen could reduce waste at Thurlstone Biscuits. [2]

6. Elmwick Candles uses just-in-time (JIT) inventory control for its wax and glass jars.

(a) Define the term lean production. [2] (b) Explain one advantage to Elmwick Candles of using JIT. [2] (c) Explain one disadvantage to Elmwick Candles of using JIT. [2]

7. Gilmerton Garden Tools sells lawnmowers. Most of its sales happen in spring and summer. Its supplier is overseas, delivery takes six weeks and is sometimes late. The firm has a small warehouse.

Explain two factors that will affect how much inventory Gilmerton Garden Tools holds. [4]

8. (a) Identify the most suitable production method for each situation. Choose from job, batch or flow production. (i) A hand-built church organ made for one parish. (ii) A dairy making 600 cartons of strawberry ice cream and then switching to vanilla. (iii) A plant making identical plastic bottles non-stop, day and night. [3] (b) Define the term flow production. [2]

9. Pickworth Toys makes wooden toys in batches. Each time it changes from one toy to the next, the set-up costs £360 whatever the size of the batch.

(a) Calculate the set-up cost per toy for a batch of 500 toys and for a batch of 800 toys. [2] (b) Explain one advantage to Pickworth Toys of batch production. [2] (c) Explain one disadvantage to Pickworth Toys of batch production. [2]

10. Ainsty Boats builds five sailing boats a year. Each is designed with the customer and sells for about £60,000. A director suggests building a standard 20-boat range using batch production, to sell at about £28,000 each. This would need £300,000 of new equipment, and the sales team is not sure that enough customers would buy a standard boat.

Recommend which production method Ainsty Boats should use. Justify your answer. [8]

11. Colbeck Laundry has 12 staff who process 2,400 items a day. After it buys a conveyor system, the same staff process 2,880 items a day.

(a) Calculate labour productivity before the new system. [2] (b) Calculate the percentage increase in labour productivity. [2] (c) Explain one disadvantage for employees of the new system. [2]

12. Yarnscombe Preserves makes jam. Its batch method uses 8 workers and makes 24,000 jars a month. A flow line would use 10 workers and make 85,000 jars a month, but costs £450,000. A supermarket may order 80,000 jars a month, though it has not yet signed a contract. Current sales are 24,000 jars a month.

Recommend whether Yarnscombe Preserves should switch to flow production. Justify your answer. [8]

Answers

1. Any two of the following, one mark each:

• to keep production going if a supplier delivers late [1]
• to meet a sudden rise in demand without losing sales [1] Examiner insight: Short, clear points suit “state”. Repeating one reason in new words does not give a second reason.

2. (a) Labour productivity = output / employees [1]. 7,560 / 27 = 280 lamps per employee [1]. (b) April: 7,200 / 24 = 300 lamps per employee [1]. Change = (300 - 280) / 280 x 100 [1]. = 7.1% increase [1]. Examiner insight: Work out productivity in both months before comparing. Total output fell, but output per worker rose.

3. Any two reasons, each with a developed explanation:

• Efficiency lowers the cost of each unit [1], so the business can make more profit or cut its price [1].
• Efficiency makes the business more competitive [1], because it can charge less than rivals or spend more on quality [1]. Examiner insight: “Explain” answers gain credit when a reason is followed by its effect. “It saves money” alone is only a statement.

4. (a) At present: 9,000 / 30 = 300 tiles per worker [1]. Option A: 11,700 / 26 = 450 tiles per worker [1]. (b) Now: 30 x £600 = £18,000; 18,000 / 9,000 = £2.00 per tile [1]. Option A: 26 x £600 = £15,600; 15,600 / 11,700 = £1.33 per tile [1]. (c) Option A raises productivity from 300 to 450, a 50% rise, and meets the full demand of 11,700 tiles [1]. Option B lifts output to 340 x 30 = 10,200 tiles, which is 1,500 tiles short of demand [1]. Option A also lowers the labour cost per tile from £2.00 to £1.33 [1]. The old method would pay £23,400 in wages for 11,700 tiles, so option A saves £7,800 a week and pays back in about 31 weeks [1]. Option B costs only £9,000 and avoids redundancies, though trained staff may leave [1]. Judgement: option A is better, because only it meets demand and it pays back within a year, provided demand stays near 11,700 tiles [1]. Examiner insight: An “evaluate” answer needs a judgement that rests on the data, such as the 1,500-tile shortfall and the payback period.

5. (a) Kaizen is continuous improvement [1] achieved through many small changes suggested by all employees [1]. (b) Workers may suggest changing the packing layout so fewer biscuits are broken [1], which reduces wasted biscuits and lowers the cost of each pack [1]. Examiner insight: Application means using the biscuits or the weekly meeting. “Kaizen reduces waste” with no how does not use the case.

6. (a) Lean production means making goods or services with as little waste as possible [1] while keeping quality high [1]. (b) With JIT Elmwick holds little wax and few jars [1], so it spends less money on storing stock and has more cash to use elsewhere [1]. (c) If a supplier delivers late, Elmwick has no spare wax or jars [1], so candle production stops and orders may be lost [1]. Examiner insight: “It is cheaper” or “it is risky” gains little. State the cause (low stock, late delivery), then the effect on this business.

7. Any two factors, each developed and applied:

• Demand is seasonal [1], so Gilmerton needs more stock before spring to avoid running out when sales peak [1].
• The supplier is overseas and sometimes late [1], so the firm needs a bigger buffer than a local supply would require [1]. Examiner insight: Pick factors the stem plainly supports, and link each to a direction: hold more or hold less.

8. (a) (i) Job production [1]. (ii) Batch production [1]. (iii) Flow production [1]. (b) Flow production is the continuous production of identical products [1] on a production line, with each stage following the last [1]. Examiner insight: “Identify” needs just the method name. Give one clear answer per situation.

9. (a) Batch of 500: 360 / 500 = £0.72 per toy [1]. Batch of 800: 360 / 800 = £0.45 per toy [1]. (b) Pickworth can switch toys as demand changes [1], offering variety with lower unit costs than one-off production [1]. (c) Machines stand idle while they are reset [1], so output is lost and each changeover adds a cost of £360 [1]. Examiner insight: Use your part (a) figures: a larger batch spreads the same set-up cost over more toys.

10. Recommendation: continue with job production [1]. Reasons: each boat is designed with its customer, so a standard batch removes what customers pay for [1]; the £60,000 premium would fall to £28,000 [1]; with only five boats a year, £300,000 of equipment is very costly [1]. Batch production needs firm evidence of demand for 20 standard boats, and the sales team is unsure [1]; if demand fell short, the equipment would sit idle [1]. Counter-argument: job production is slow, needs costly skilled labour and has a high cost per boat [1]. Conclusion: job production suits Ainsty Boats better, because customers value a bespoke boat and the batch plan carries cost and demand risk [1]. Examiner insight: State a method first, use several facts from the stem (five boats, £60,000, £300,000, unsure demand) and say why the rejected option fits less well.

11. (a) Labour productivity = output / employees [1]. 2,400 / 12 = 200 items per employee per day [1]. (b) After: 2,880 / 12 = 240 [1]. (240 - 200) / 200 x 100 = 20.0% increase [1]. (c) The conveyor may replace tasks staff did, so jobs could be lost [1]. Remaining staff may find work repetitive or feel insecure, lowering motivation [1]. Examiner insight: A service business can show productivity as items per employee. Write the unit next to your answer.

12. Recommendation: do not switch yet, or switch only once the contract is signed [1]. For switching: flow makes 8,500 jars per worker against 3,000, nearly 2.8 times as much, so labour cost per jar falls [1]; it makes 85,000 jars, enough to meet the possible supermarket order of 80,000 [1]. Against switching: current sales are only 24,000 jars, which the batch method already makes [1]; the £450,000 cost would be heavy, and with no contract signed the flow line could stand mostly idle [1]; flow production is inflexible, so a firm making many flavours would find changes harder [1]. Alternative: wait for a signed contract, or add batch capacity [1]. Judgement: keep batch production until demand is secure, because £450,000 is justified only if sales fill the line [1]. Examiner insight: A recommendation with a condition (a signed contract) works if the reasoning is clear. Weigh the productivity gain against the risk that demand does not arrive.

Where marks are usually lost

• Giving productivity without a unit or period.
• Using total output instead of output per worker.
• Rounding a percentage change too early.
• Defining Kaizen as one big project, not continuous small changes.
• Saying JIT means no stock, rather than very little.
• Giving advantages with no link to the named business.
• Recommending a method without quoting figures from the question.
• Giving one side only when asked to justify or evaluate.

Frequently asked questions

Are these Cambridge IGCSE Business 0264 past paper questions? No. They are twelve original questions written for Marlbridge on section 4.1 (Production of goods and services), not reproduced past-paper questions. Use them alongside the official past papers from your board or school.

How do you get application marks on a lean production question? Use details from the case, such as the named business, its products or its weekly meeting, and show how the method works there. A general statement such as “Kaizen reduces waste” with no explanation of how does not use the case.

How do you recommend a production method in an exam answer? State the method first, then use several facts from the stem, such as quantity, price and how customised the product is. Finish by saying why the rejected method fits the business less well.

Can a recommendation include a condition? Yes, a recommendation that depends on a condition, such as a contract being signed, can work if the reasoning is clear. It should still weigh the gain against the risk that the expected demand does not arrive.

Next steps

• Revise with the revision notes.
• Re-read the study guide.
• Go to the course page or print the checklist.
• Try the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029, published by Cambridge International Education, section 4.1.