BTEC Level 1/Level 2 First Award in Business| 2022 UPDATE | MOCK EXAM 2 ANSWER

BTEC Level 1/Level 2 First Award in Business Page 1 of 12 Unit 2: Finance for Business MOCK EXAM 2 ANSWERS Question Number Answer Mark 1 Licence needed to sell certain goods or services (1) Question Number Answer Mark 2 Repairs and Maintenance (1) Question Number Answer Mark 3 Total Cost = Fixed Costs + Variable Costs (1) £1,000 = £500 + (£5 X 100) (1) (2) Question Number Answer Mark 4 Revenue = number of sales X price per unit (1) £607.50 = £4.50 X 135 (2) Page 2 of 12 Question Number Answer Mark 5 Raw Materials (1) Question Number Answer Mark 6 Annual internet connection charge (1) Question Number Answer Mark 7(a) Point A (1) 7 (b) The Distance between Q1 and Q2 (1) 7 (c) Line B (1) 7 (d) Line A (1) Question Number Answer Mark 8 A budget will help a business identify where it expects to receive its money from and how it plans to spend it. (1) A budget will help set targets for departments e.g. sales targets for the sales team and these can be motivating. (1) By completing the budget process a business may identify potential problems and take corrective action by cutting costs (1) Maximum of 2 marks for this question. (2) Page 3 of 12 Question Number Answer Mark 9 Year 1 2 2 4 Total Revenue £12,000 £12,000 £12,000 £12,500 Total Cost £6,620 £7,424 £7,856 £7,008 Profit £5,380 £4,576 £4,144 £5,492 Total Variable Costs £5,400 £6,060 £6,420 £5,500 Total Fixed Costs £1,220 £1,364 £1,436 £1,508 Positive  Revenue was constant for years 1 to 3  Revenue is estimated to increase in year 4 despite fewer sales  The business makes a profit in each year  Year 4 is estimated to be the most profitable year  Rent has remained constant each year Negative  Breakeven point increased from year 1 to 3  Year 4 data is based on estimates – there is no guarantee that sales will only fall by 100 units.  Variable costs (Delivery costs and raw materials) have increased each year but the selling price has remained constant for year 1 to 3  Wages have increased each year  For years 1 to 3 the business has to make and sell more handbags to break even  Profit levels decrease in year 2 and 3.  Margin of safety has decreased in year 2 and 3. 1-3 marks A few points identified – answer likely to be in a list. (8) Page 4 of 12 4 marks – 2 points listed with some development 5-6 marks – 3 or more points developed with reference to the data provided. 7-8 marks – Answer well developed with reference to data provided – clear discussion with full justification. Question Number Answer Mark 10 to identify the money that should be coming into a business (inflows) and the money going out of the business (outflows) (2) Question Number Answer Mark 11 Take Away cash sales (1) Eat in restaurant sales paid by cash (1) (2) Question Number Answer Mark 12 (a) 12(b) The cost of producing a product. (1) The money made from selling a product after the cost of producing the product has been deducted. (1) (2) Page 5 of 12 Question Number Answer Mark Q13 The business is making a loss. (1) Question Number Answer Mark Q14 Income from Sales £50,000 Cost of Sales £30,000 Gross Profit £20,000 Expenses Rent £6,000 Wages £12,000 Van Insurance £320 Internet costs £140 Utilities £435 Net Profit £1,105 (2) Page 6 of 12 Question Number Answer Mark Q15 Assets Fixed Assets Van £3,950 Total Fixed Assets £3,950 Current Assets Stock £380 Debtors £455 Bank £1,290 Total Current Assets £2,125 Total Assets £6,075 Liabilities Current Liabilities Trade Creditors £650 Overdraf £250 Total Current Liabilities £900 Net Current Assets £5,175 (1) (1) (1) Page 7 of 12 Question Number Answer Mark Q16 (a) Year 1 Year 2 Year 3 Year 4 Bicycles Sold Total Revenue £15,120 £15,750 £16,380 £16,900 Total Costs £5,670 £8,400 £10,530 £13,000 Profit £9,450 £7,350 £5,850 £3,900 Costs are increasing at a faster rate than total revenue is. (1) If this continues the business will make a loss in the future. (1) Profit levels keep falling (1) due to total costs increasing at a faster rate than total revenue (1). (2) Q16 (b) Josh could try to reduce the amount he pays for his second hand bicycles If he maintains his selling price and sales volume then his profit will increase. (2) Josh could increase the price he charges for his bicycles. As long as the price he pays for his stock and maintains the same sales volume after the selling price increase then his business will make more profit. (2) Josh could try to increase his sales – if he maintains his selling price and purchase price of second hand bikes but increases his sales volume, then his business will make more profit. (2) Maximum marks 2 marks (2) Page 8 of 12 Page 9 of 12 Question Number Answer Mark Q17 The business may not know whether to expand/reduce activities. A cash flow forecast will show which activities are covering their costs and which are struggling to bring in enough cash to cover their costs. (2) The business may experience cash flow problems if it has not planned to cover known fluctuations in its cash flow e.g. seasonal sales (2) The business may experience cash flow problems if it decides to purchase a large value item and pay all the associated costs in one payment (2). The business may experience cash flow problems if it is unaware of periods where its expected revenue will be lower than its expected costs. Maximum marks for this question 2 (2) Page 10 of 12 Question Number Answer Mark Q18 Positive Negative Revenue Revenue has fallen by £2,000 Cost of Sales Cost of Sales have been controlled -they now account for 40% of revenue compared to 50% in year 1. Gross Profit Has increased by £2,200 Net Profit Has increased by £520 The increase in net profit is much smaller than the increase in gross profit, suggests expenses are not being controlled. Wages Increased by £500 Rent Has doubled to £1,000 Electricity Small increase £20 Mobile Phone Rental New cost for year 2 - is it essential Van Hire New cost for year 2 - is it essential Advertising 0 expenditure in year 2 Is this a false economy - revenue has fallen - should the business be spending on advertising to generate sales?  Both Gross and Net Profit have increased  Profits can be reinvested into the business to help it grow.  The business appears to be controlling its direct costs (cost of sales)  The business needs to evaluate its indirect costs – are the new costs for year 2 (8) Page 11 of 12 essential.  Revenue has fallen, this may be due to either a fall in demand or charging lower prices.  Raj can be pleased with controlling indirect costs. This has helped to increase Gross Profit despite a fall in revenue.  Raj should be concerned about falls in revenue – needs to investigate if this is due to selling price or changes in demand.  Raj should be concerned about indirect costs (expenses) especially rent which has doubled and new expense items such as van hire and mobile phone rental. If indirect costs are not controlled the business could end up making a loss in the future. 1-3 marks A few points identified – answer likely to be in a list. 4 marks – 2 points listed with some development 5-6 marks – 3 or more points developed with reference to the data provided. 7-8 marks – Answer well developed with reference to data provided – clear discussion with full justification. Page 12 of 12