This set has ten original questions, ordered from easier to harder, covering the five lessons in case analysis and evaluation. Questions 1 and 2 practise choosing facts, 3 and 4 causal chains, 5 and 6 conditional alternatives, 7 and 8 conclusions, and 9 and 10 checking judgements.
Write each answer on paper first, with working. Then open the worked answer and compare. All businesses are fictional, and the figures are made up for practice.
Wording of command words and papers differs between Business Studies 0450 and Business 0264, so check the Cambridge page for your exam year.
Choosing relevant facts
1. Kedai Runcit Berkat in Kangar sells 120 bottles of cooking oil a week at RM5.80. The case says: (a) the shop opened in 2010, (b) the wholesaler has raised the cost per bottle from RM4.50 to RM5.10, (c) the owner’s son studies in Penang, (d) the shop sells 120 bottles a week. The owner asks whether to keep the price at RM5.80. Which two of the facts (a) to (d) are relevant, and why?
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Relevant: facts (b) and (d). The cost rise changes the profit on each bottle, and the weekly volume shows the total effect. Facts (a) and (c) are background and would not change the advice.
2. Using the same case, write two sentences that use the selected facts to show what the cost rise does to weekly profit on cooking oil.
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Profit per bottle before: 5.80 − 4.50 = RM1.30. After: 5.80 − 5.10 = RM0.70.
Weekly: 120 × 1.30 = RM156 before, and 120 × 0.70 = RM84 after. The fall is 156 − 84 = RM72.
Sample answer: “The wholesaler’s rise cuts the profit per bottle from RM1.30 to RM0.70. On 120 bottles a week, the shop earns RM72 less, so keeping the price at RM5.80 costs the owner a lot of margin.”
Causal chains
3. Roti Hasan in Taiping bakes 50 extra loaves a day that go unsold. Each loaf costs RM1.20 to make. If the baker bakes to order, wasted loaves fall to 20 a day. Build a causal chain to profit and find the monthly saving for 26 days.
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Chain: baking to order means fewer loaves are made that nobody buys, so less flour and labour are wasted, so costs fall and profit rises.
Fewer wasted loaves: 50 − 20 = 30 a day. Saving: 30 × 1.20 = RM36 a day. Monthly: 36 × 26 = RM936.
(Check: 36 × 26 = 36 × 25 + 36 = 900 + 36 = 936.)
4. “Higher wages make workers happier, so the business grows.” (a) Add the missing links. (b) A firm has 10 workers and raises each worker’s wage by RM100 a month. Each extra unit sold adds RM5 contribution. How many extra units must the wage rise bring to cover its cost?
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(a) Higher wages may raise motivation, which may raise output or cut staff leaving, which can lower the cost of each unit or allow more to be sold, which can raise contribution. The wage rise is also a cost, so the chain must compare the two.
(b) Extra cost: 10 × 100 = RM1,000 a month. Units needed: 1,000 ÷ 5 = 200 extra units.
Conditional alternatives
5. Salon Seri Dewi in Melaka does 200 haircuts a month at RM25, and each costs RM5 in materials. Option A is to raise the price to RM28. What is the least number of haircuts it must keep to earn at least the same total contribution, and how many customers can it lose?
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Now: (25 − 5) × 200 = 20 × 200 = RM4,000.
After the rise, contribution per haircut is 28 − 5 = RM23. Haircuts needed: 4,000 ÷ 23 = 173.9, so 174. Check: 23 × 174 = 4,002 and 23 × 173 = 3,979.
Customers it can lose: 200 − 174 = 26, which is 13% of 200.
Conditional: the rise adds contribution if it keeps at least 174 haircuts a month.
6. Option B is a 10% student discount (RM22.50 per haircut). Suppose 20 existing customers switch to the discount. How many extra student customers does the salon need to cover the lost income? State the condition for option B.
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Price with discount: 25 × 0.9 = RM22.50. Contribution per student haircut: 22.50 − 5 = RM17.50.
Lost contribution from 20 switchers: 20 × 2.50 = RM50.
Extra students needed: 50 ÷ 17.50 = 2.86, so 3. Check: 3 × 17.5 = 52.5 and 2 × 17.5 = 35.
Condition: the discount adds profit if it attracts at least 3 extra students beyond those who would have come anyway, so more than 20 switchers would need more extra students.
Conclusions tied to an objective
7. Two years ago, a RM2 price rise at Salon Seri Dewi lost 10 of 200 customers. The owner’s objective is to raise profit this year. Using question 5, write a conclusion on option A.
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The earlier rise lost 10 of 200, which is 5%. Option A can lose up to 26 customers (13%). If 10 customers are lost: 190 × 23 = RM4,370, compared with RM4,000 now, a gain of RM370 a month.
Sample conclusion: “The salon should raise the price to RM28. The last rise lost only 5% of customers, well within the 13% this rise can afford, so profit should rise by about RM370 a month. This assumes a RM3 rise behaves like the earlier RM2 rise, so the owner should check the first month’s numbers.”
8. Now suppose the objective is to keep every regular customer for the next year because a rival salon is opening next door. How should the conclusion change?
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The same figures now matter differently. A price rise could lose up to 26 customers, and the case gives no evidence on how regulars would react once a rival is nearby.
Sample conclusion: “The salon should hold the price at RM25 for now. The objective is to keep regulars, and a rise risks losing some of them just when a rival opens. The owner could revisit the price once the effect of the rival is clear.”
The evidence is the same as in question 7. The objective changed, so the recommendation changed.
Checking judgements
9. A student writes: “Kopitiam Lee made RM48,000 profit last year, so a second branch will succeed.” The branch would cost RM5,000 a month in fixed costs. Does the judgement follow the evidence?
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Yearly fixed costs of the branch: 5,000 × 12 = RM60,000. This is more than last year’s whole profit of RM48,000. The branch must earn more than RM60,000 in contribution just to break even.
The claim does not follow. Last year’s profit shows the first shop did well, not that a second one will.
Better: “The branch needs over RM60,000 in yearly contribution to break even, so the owner needs evidence of demand before opening it.”
10. A survey of 40 existing customers found that 28 would order online. A student writes: “70% of all customers will order online, so online sales will be high.” Check the claim.
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28 ÷ 40 = 0.70, so 70% of the 40 surveyed said they would. The calculation is right, but the claim goes further than the evidence.
Problems: the sample is small, it covers only existing customers, and people say what they might do, not what they will do.
Better: “In a survey of 40 customers, 70% said they would order online. This suggests some demand, but it is a small sample of intentions, so the firm should test with a trial.”
If you got these wrong
| Error you made | Go back to |
|---|---|
| Retold the case, or chose a fact with no link to the decision | Select a relevant fact rather than repeat the whole case |
| Jumped from a concept to profit, or the calculation inside a chain was wrong | Build a causal chain from concept to business outcome |
| Wrote “it might work” with no threshold, or the break-even number was wrong | Develop two conditional alternatives |
| Summarised instead of deciding, or ignored the stated objective | Write a conclusion tied to the business objective |
| Claimed more than the numbers showed, or treated an estimate as certain | Check that a judgement follows the evidence |
Use the business case-answer planner to lay out facts, chain and alternatives before you write a longer answer. Keep a note of each error type in the mistake log and retest queue, then retry a fresh version a few days later. The cash versus profit bridge gives extra practice with timing and payback.
When the same slip keeps appearing, it helps to have someone read your working. Our teachers do this in online one-to-one Business tuition.