O Level Business: Operations management — Practice Questions (Cambridge 7115)

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 — Cambridge International holds copyright in its own papers. Use these alongside the official past papers available from your board.

Each question practises a skill tested in the June 2024 Paper 12. After each answer there is an examiner insight, a mark-scheme insight or a tip and, where one matches, the real question to try next.

---

Questions

1. A company makes plastic water bottles using flow production. (a) Explain one advantage to the company of using flow production. (b) Explain one disadvantage to the company of using flow production. [4]

2. State what is meant by batch production and give one example of a product likely to be made this way. [2]

3. A furniture maker that uses large amounts of timber is choosing where to build a new workshop. Explain one reason why it needs to consider the location of its suppliers. [3]

4. A soft drinks manufacturer is choosing a site for a new bottling plant. Explain one reason why it must consider the suitability of the land for the plant. [3]

5. A small team of 12 workers at a shoe factory produced 5 400 pairs of shoes in one week. Calculate the labour productivity of the team per worker per week. [2]

6. A business makes garden benches. Its fixed costs are $18 000 per month. Each bench sells for $25 and has variable costs of $13. (a) Calculate the break-even level of output per month. (b) The business expects to sell 2 000 benches next month. Calculate its margin of safety. [4]

---

Answers

1. (a) The company can benefit from economies of scale [1], because it produces very large quantities, which lowers the average (unit) cost of each bottle [1]. (Also credit: production is capital intensive, so labour costs are lower; or it can run continuously.) (b) Production is inflexible — it is hard to change the product [1], so the company may be unable to meet customers who want different sizes or designs of bottle [1]. (Also credit: repetitive work demotivates workers, raising absenteeism or labour turnover; or one machine breaking down stops the whole line, delaying output.)

Examiner insight (Cambridge 7115 June 2024 examiner report, Paper 12, Question 4(e)): A common misconception was that economies of scale simply “lower costs”; they lower average (unit) costs. High output also does not automatically mean high sales.

Source for the examiner insights on this page: Cambridge O Level Business Studies 7115 June 2024 Principal Examiner Report for Teachers, Paper 7115/12 section, paraphrased.

Try the real question next: Cambridge O Level Business Studies 7115, June 2024, Paper 12, Question 4(e).

2. Batch production is making a group of identical products together, then moving on to a different group [1]. Example: loaves of bread, batches of biscuits, or a run of T-shirts in one colour [1].

Examiner insight (Cambridge 7115 June 2024 examiner report, Paper 12, Question 4(e)): Several candidates writing about flow production confused it with batch or job production. Learn a clear definition of each so you can tell them apart.

3. The distance from suppliers matters [1]: timber is heavy and bulky, so being close to timber suppliers [1] would reduce transport costs and let materials arrive more quickly, helping keep production on time [1].

Examiner insight (Cambridge 7115 June 2024 examiner report, Paper 12, Question 4(d)): The most common credited answer was distance, developed into its effect on transport costs. A frequent mistake was simply defining what a supplier is instead of explaining why suppliers affect the location decision.

Try the real question next: Cambridge O Level Business Studies 7115, June 2024, Paper 12, Question 4(d).

4. The site must have a reliable supply of water and electricity [1], because a bottling plant needs large volumes of water for its drinks and power for its machines [1]; without them production would stop [1]. (Also credit: enough space for the plant and future expansion; the cost of the land or rent, which raises fixed costs; good transport links for deliveries.)

Examiner insight (Cambridge 7115 June 2024 examiner report, Paper 12, Question 4(d)): Good answers mentioned factors such as rent, space or electricity and their effect on costs or production. Saying the land “needs to be suitable” with no development gained nothing, and points about access to customers were not credited, because this is not a significant factor for a manufacturer.

Try the real question next: Cambridge O Level Business Studies 7115, June 2024, Paper 12, Question 4(d).

5. Labour productivity = output ÷ number of workers = 5 400 ÷ 12 [1] = 450 pairs of shoes per worker per week [1].

Tip: Always give the units (here, pairs per worker per week) — a number on its own does not show what has been measured.

6. (a) Contribution per bench = $25 − $13 = $12 [1]. Break-even output = fixed costs ÷ contribution per unit = 18 000 ÷ 12 [1] = 1 500 benches per month [1]. (b) Margin of safety = expected sales − break-even output = 2 000 − 1 500 = 500 benches [1].

Tip: Divide fixed costs by contribution per unit (price minus variable cost), not by the selling price. Break-even output is measured in units, not dollars.

---

Where marks are usually lost

• Saying economies of scale “lower costs” instead of “lower average (unit) costs”.
• Confusing flow production with batch or job production.
• Defining a term from the question (such as “suppliers”) instead of explaining why it matters.
• Dividing fixed costs by the selling price instead of by contribution per unit in break-even calculations.
• Leaving units off productivity or break-even answers.