OCR A-Level Business 2027 Predicted Practice Paper — Paper 1

Answer ALL questions. Write your answers in the spaces provided. You must write down all the stages in your working.

Section A

Multiple choice questions. Answer all questions.

• 1

  Question SECTION-A1 (1 mark)

  A sole trader is a business owned by one person who has unlimited liability. Which one of the following is the main consequence of unlimited liability for a sole trader?

  A. The owner's personal assets can be used to settle business debtsB. The business must publish its accounts to Companies HouseC. The owner can sell shares to raise financeD. The business pays corporation tax on all profits

  (Total for Question SECTION-A1 is 1 mark)
• 2

  Question SECTION-A2 (1 mark)

  A cafe sells 400 coffees per week at a price of GBP 3.00 each. The variable cost per coffee is GBP 1.20. What is the total weekly contribution?

  A. GBP 480B. GBP 720C. GBP 1,200D. GBP 1,080

  (Total for Question SECTION-A2 is 1 mark)
• 3

  Question SECTION-A3 (1 mark)

  Which one of the following is a fixed cost for a manufacturing business?

  A. Raw materials used in productionB. Rent on the factory premisesC. Packaging for each item soldD. Piece-rate wages paid per unit produced

  (Total for Question SECTION-A3 is 1 mark)
• 4

  Question SECTION-A4 (1 mark)

  A business has a current ratio of 0.7:1. Which one of the following best describes what this indicates?

  A. The business holds too much inventoryB. The business may struggle to pay its short-term debtsC. The business is highly profitableD. The business has no long-term borrowing

  (Total for Question SECTION-A4 is 1 mark)
• 5

  Question SECTION-A5 (1 mark)

  Which one of the following is most likely to be a benefit of using primary market research rather than secondary research?

  A. It is always cheaper to collectB. It is data specific to the firm's own research objectivesC. It is already published and instantly availableD. It never becomes out of date

  (Total for Question SECTION-A5 is 1 mark)
• 6

  Question SECTION-A6 (1 mark)

  A firm increases the price of a product with price-inelastic demand. What is the most likely effect on total revenue?

  A. Total revenue fallsB. Total revenue risesC. Total revenue stays exactly the sameD. Total revenue falls to zero

  (Total for Question SECTION-A6 is 1 mark)
• 7

  Question SECTION-A7 (1 mark)

  Which one of the following is the correct formula for net profit margin?

  A. (Net profit / revenue) x 100B. (Net profit / capital employed) x 100C. (Gross profit / revenue) x 100D. (Revenue / net profit) x 100

  (Total for Question SECTION-A7 is 1 mark)
• 8

  Question SECTION-A8 (1 mark)

  Herzberg identified factors that can cause dissatisfaction at work but do not motivate. What did he call these factors?

  A. MotivatorsB. Hygiene factorsC. Self-actualisation needsD. Esteem needs

  (Total for Question SECTION-A8 is 1 mark)
• 9

  Question SECTION-A9 (1 mark)

  A business is considering a bank overdraft as a source of finance. Which one of the following is the main characteristic of an overdraft?

  A. It is a long-term source repaid over many yearsB. It provides short-term, flexible borrowing up to an agreed limitC. It requires selling a share of ownershipD. It is interest-free finance from suppliers

  (Total for Question SECTION-A9 is 1 mark)
• 10

  Question SECTION-A10 (1 mark)

  Which one of the following best describes economies of scale?

  A. A fall in average unit cost as output increasesB. A rise in total costs as output increasesC. A fall in total revenue as prices riseD. An increase in fixed costs per unit as output rises

  (Total for Question SECTION-A10 is 1 mark)
• 11

  Question SECTION-A11 (1 mark)

  A product is in the decline stage of its life cycle. Which one of the following extension strategies is most appropriate?

  A. Launching an entirely unrelated productB. Finding new uses or new markets for the productC. Withdrawing all promotional spending immediatelyD. Increasing the price sharply to boost margins

  (Total for Question SECTION-A11 is 1 mark)
• 12

  Question SECTION-A12 (1 mark)

  Which one of the following is an example of an internal stakeholder in a business?

  A. A local pressure groupB. An employee of the businessC. A supplier of raw materialsD. The local community

  (Total for Question SECTION-A12 is 1 mark)
• 13

  Question SECTION-A13 (1 mark)

  A firm forecasts closing cash of GBP 8,000 in a month. Opening cash was GBP 5,000 and total cash outflows were GBP 12,000. What were the total cash inflows for the month?

  A. GBP 9,000B. GBP 15,000C. GBP 25,000D. GBP 1,000

  (Total for Question SECTION-A13 is 1 mark)
• 14

  Question SECTION-A14 (1 mark)

  Which one of the following is most likely to be a benefit of delegation for a manager?

  A. It removes all accountability from the managerB. It frees managerial time to focus on strategic tasksC. It guarantees every task is completed perfectlyD. It eliminates the need for any training

  (Total for Question SECTION-A14 is 1 mark)
• 15

  Question SECTION-A15 (1 mark)

  A business calculates a payback period of 2.5 years on a new machine. Which one of the following does this figure represent?

  A. The total profit the machine will earnB. The time taken for net cash inflows to recover the initial costC. The rate of return expressed as a percentageD. The value of the machine after 2.5 years

  (Total for Question SECTION-A15 is 1 mark)

Section B

Resource-booklet data response and extended response questions. Answer all questions.

• 1

  Question SECTION-B1 (6 marks)

  Resource Booklet Extract A: Brew & Bean Ltd is a chain of independent coffee shops operating in three towns in the North of England. In 2026 it had annual revenue of GBP 1,200,000, fixed costs of GBP 450,000 and variable costs equal to 40% of revenue. The Managing Director, Priya, wants to open a fourth shop. Using Extract A, calculate Brew & Bean Ltd's net profit for 2026. Show your working.

  (Total for Question SECTION-B1 is 6 marks)
• 2

  Question SECTION-B2 (6 marks)

  Resource Booklet Extract B: The proposed fourth shop for Brew & Bean Ltd would require an initial investment of GBP 180,000. Priya expects it to generate net cash inflows of GBP 60,000 in Year 1, GBP 80,000 in Year 2 and GBP 90,000 in Year 3. Using Extract B, calculate the payback period for the fourth shop. Show your working.

  (Total for Question SECTION-B2 is 6 marks)
• 3

  Question SECTION-B3 (8 marks)

  Explain one benefit and one drawback to Brew & Bean Ltd of using a penetration pricing strategy when opening its new fourth coffee shop.

  (Total for Question SECTION-B3 is 8 marks)
• 4

  Question SECTION-B4 (10 marks)

  Resource Booklet Extract C: Priya is concerned that staff turnover in Brew & Bean's existing shops has risen to 35% per year. Baristas report that pay is competitive but the work feels repetitive and offers little recognition or responsibility. Analyse how Brew & Bean Ltd could use motivation theory to reduce its staff turnover.

  (Total for Question SECTION-B4 is 10 marks)
• 5

  Question SECTION-B5 (15 marks)

  Resource Booklet Extract D: To finance the fourth shop, Priya is choosing between (i) a five-year bank loan of GBP 180,000 at a fixed interest rate, and (ii) issuing new shares to a family member who would become a part-owner of Brew & Bean Ltd. Evaluate whether Brew & Bean Ltd should use a bank loan or new share capital to finance the fourth shop. Justify your recommendation.

  (Total for Question SECTION-B5 is 15 marks)
• 6

  Question SECTION-B6 (20 marks)

  Resource Booklet Extract E: Brew & Bean Ltd's mission statement commits it to 'ethical sourcing and supporting local communities'. Some of its investors, however, are pressing Priya to prioritise higher short-term profits, for example by switching to cheaper, non-Fairtrade coffee beans. Evaluate whether Brew & Bean Ltd should always prioritise its ethical objectives over the demands of investors for higher short-term profits. Justify your view.

  (Total for Question SECTION-B6 is 20 marks)