OCR GCSE Business: Operations, Finance and Influences — Practice Questions

These are original questions written for Marlbridge, in the style and at the standard of the examination. They are not reproduced past-paper questions — examination boards hold copyright in their own papers. Use these alongside the official past papers available free from your board.

Related: Operations, Finance and Influences on Business study guide | Operations, Finance and Influences revision notes

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Section A

1. Name the three main production processes and give one product example for each. [3]

2. State two sources of finance suitable for a newly established small business. [2]

Section B

3. Distinguish between quality control and quality assurance, explaining why a business might prefer one approach over the other. [4]

4. A product sells for £18. Variable costs are £11 per unit, and fixed costs are £5,600 per month.

(a) Calculate the contribution per unit and the break-even quantity. [3] (b) Explain what happens to profit if the business sells 100 units more than the break-even quantity in a month. [3]

5. A business has revenue of £80,000. Cost of sales is £48,000, and other business expenses total £19,000.

(a) Calculate gross profit and net profit. [3] (b) Explain the difference between gross profit and net profit. [2]

6. Explain why a profitable business could still run out of cash, using the terms “cash flow” and “profit” in your answer. [4]

7. Explain one ethical or environmental consideration that could influence a business’s choice of supplier. [3]

8. Evaluate whether globalisation is more of an opportunity than a risk for a small UK manufacturing business. [9]

Section C — synoptic

9. A business introduces a new product (Business 1: marketing) and, as a result, must relocate part of its production overseas to keep costs low (Business 2: operations and finance). Explain one way this relocation could affect the business’s supplier relationships, and one way it could affect its cash flow. [4]

Answers

1. Job production — a single, unique item made to order (e.g. a wedding cake or a bespoke suit) [1]. Batch production — a group of identical items made together before switching to a different batch (e.g. a bakery’s bread batches) [1]. Flow production — a continuous production line making identical items (e.g. a car assembly line) [1].

2. Any two: owners’ capital, loans, overdrafts, trade credit, retained profit, crowdfunding [1] [1].

3. Quality control checks products after production for defects [1], while quality assurance builds quality checks into the production process itself to prevent defects occurring in the first place [1]. A business might prefer quality assurance because preventing defects before they happen is usually cheaper and less wasteful than discovering and discarding faulty finished products [1], though quality control remains necessary as a final safeguard even where assurance processes are in place [1].

4. (a) Contribution per unit = £18 − £11 = £7 [1]; break-even quantity = £5,600 ÷ £7 = 800 units [1] [1]. (b) Once fixed costs are covered at break-even, each additional unit sold contributes its full £7 directly to profit [1], since fixed costs do not rise with extra output [1]; 100 extra units therefore add £700 to monthly profit [1].

5. (a) Gross profit = £80,000 − £48,000 = £32,000 [1]; net profit = £32,000 − £19,000 = £13,000 [1] [1]. (b) Gross profit measures how efficiently a business buys and sells its core product, before other costs are considered [1]; net profit accounts for the full cost of running the business, including expenses such as rent, wages and utilities [1].

6. Profit is recorded as soon as a sale is agreed, but the related cash may not actually be received for weeks if customers are given payment terms [1]. Cash flow, in contrast, reflects only money that has actually moved in and out of the business [1]. A business can therefore show a healthy profit on paper while having too little cash on hand to pay its own suppliers, wages or bills if cash is leaving faster than it is arriving [1], which is why cash flow and profit must be managed as two separate concerns rather than assumed to move together [1].

7. Any one, fully explained: a business may choose suppliers who pay workers fairly and provide safe working conditions, to avoid reputational damage from being linked to poor labour practices [1] [1]; or a business may choose suppliers who source materials sustainably, to reduce environmental impact and appeal to increasingly environmentally conscious customers [1] [1].

8. For globalisation as an opportunity: it opens access to larger overseas markets, allowing a small manufacturer to grow sales beyond a limited domestic customer base [1]; it can also reduce costs through cheaper overseas sourcing of materials or components [1]; and it allows businesses to build international brand recognition as multinational competitors and customers become more familiar with UK products [1]. Against — as a risk: globalisation exposes a small manufacturer to increased competition from larger, lower-cost overseas producers who may undercut it in its own domestic market [1]; it also creates exposure to currency fluctuations that can unpredictably raise the cost of imported materials or reduce the value of overseas sales [1]; and a small business typically has far less capacity to absorb these risks than a large multinational, since it lacks the scale, cash reserves or diversified markets to cushion a sudden shock [1]. Judgement: for a small UK manufacturer specifically, globalisation is more likely to represent a risk than an opportunity in the short term [1], because the scale needed to exploit new export markets or negotiate favourable overseas sourcing deals usually requires resources a small business does not yet have [1], though this balance can shift as the business grows and gains the capacity to compete internationally [1].

9. Supplier relationships: relocating production overseas likely means ending relationships with existing domestic suppliers and building new ones with overseas suppliers, which can introduce logistics, communication and reliability risks that did not exist with established local suppliers [1] [1]. Cash flow: overseas suppliers may require different, often less flexible, payment terms (such as payment in advance rather than trade credit), which could strain cash flow if the business is used to paying domestic suppliers only after receiving goods [1] [1].

A note on break-even and profit questions

Question 4 illustrates a distinction worth being explicit about in an exam answer: break-even itself is the point where total revenue exactly equals total costs, but the more commonly tested follow-up question asks what happens beyond break-even, where fixed costs are already covered and each additional unit’s contribution converts directly into profit. Students who can calculate a break-even quantity correctly sometimes lose marks on this follow-up simply because they recalculate total costs and total revenue from scratch for the new output level, rather than recognising that the contribution-per-unit figure they already found applies directly to any output above break-even.

Where marks are usually lost

• Confusing quality control (checking after production) with quality assurance (building checks into the process).
• Quoting gross profit when a question asks specifically for net profit, or vice versa.
• Explaining cash flow problems purely in terms of “not enough sales” rather than the timing mismatch between recorded profit and actual cash received.
• Discussing globalisation as only an opportunity, without weighing the risks the specification explicitly expects for an “evaluate” question.
• Missing the synoptic requirement in Section C-style questions by answering only from Business 2 content, without connecting to a Business 1 decision.

Approaching operations, finance and influences questions

For any calculation question in this component, write out the formula being used before substituting numbers, since partial credit is typically available for a correctly applied method even where the final answer contains an arithmetic slip. When a question uses the word “evaluate,” always structure the answer around a clear “for” case, an “against” case, and a final judgement that explicitly weighs the two rather than simply restating both sides — this is the single most common mark loss on the longer influences-on-business questions. Finally, keep at least one worked example of a decision that spans Business 1 and Business 2 — such as a marketing launch that requires a location or supplier change — fresh in mind throughout revision, since Section B of the Business 2 paper is guaranteed to include synoptic questions that specifically reward this kind of cross-component thinking.