Paper 2: Influences of marketing and finance on business activity

Which type of market research involves collecting new, first-hand data?

In which stage of the product life cycle do sales grow most rapidly?

What is price skimming?

Which one of the following is an internal source of finance?

Gross profit is calculated as:

The break-even point is where:

Which one of the following is a method of promotion?

Segmenting a market by age is an example of segmentation by:

A business has revenue of £80,000 and gross profit of £20,000. Calculate its gross profit margin.

Fixed costs are £6,000, selling price is £15 and variable cost per unit is £7. Calculate the break-even level of output. Show your working.

Explain one disadvantage to a small business of using a bank overdraft.

Explain two benefits to a business of using social media for promotion.

Case study (fictional business written for this paper): Lumen & Loom is a partnership making hand-poured candles in Norwich. It sells at craft markets and through its own website at £18 per candle. Its USP is scents based on Norfolk places. Sales have stopped growing. It is considering a monthly subscription box. Cash-flow forecast (£):

	Jan	Feb	Mar
Opening balance	2,000	2,200	?
Cash inflows	5,000	4,000	6,500
Cash outflows	4,800	5,600	5,200

Define 'unique selling point' (USP).

Calculate Lumen & Loom's closing balance for February.

Explain one way Lumen & Loom could extend the life cycle of its candles.

Analyse the benefits to Lumen & Loom of introducing a subscription box.

Evaluate whether Lumen & Loom should carry out primary market research before launching the subscription box.

Option 1: reduce the price of candles to £14. Option 2: pay social-media influencers to promote the brand. Justify which option Lumen & Loom should choose to increase sales.

Case study (fictional business written for this paper): Northfold Brewery Ltd makes craft beer in Yorkshire. Last year: revenue £1,200,000, cost of sales £700,000 and other expenses £350,000. It plans a £200,000 canning line expected to generate total extra profit of £150,000 over 5 years. It must choose how to finance the investment. Interest rates have recently risen. Calculate Northfold Brewery's net profit margin.

Calculate the average rate of return (ARR) on the canning line. Show your working.

Explain two sources of finance Northfold Brewery could use for the canning line.

Analyse the impact of higher interest rates on Northfold Brewery.

Evaluate whether Northfold Brewery should finance the canning line with a bank loan or by selling shares to new investors.

Option 1: build the canning line to supply UK supermarkets. Option 2: use the money to start exporting draught beer to bars in Europe. Justify which option Northfold Brewery should choose.