2024 Cambridge IGCSE Enterprise (0454) Practice Paper with Answers

Precise definition [2]
Partial definition showing some understanding [1]

Answers may include:
- A legal status where the owners' personal liability for the business's debts is restricted to the amount they invested. [2]
- Shareholders do not lose their personal possessions to pay business debts. [1]
- The business and its owners are separate legal entities. [1]

2 marks for a precise definition.
1 mark for a partial definition showing some understanding.

1 mark per correct reason stated, up to a maximum of 2 marks.

Reasons may include:
- To identify what tasks need to be completed [1]
- To assign responsibility for each task / know who is doing what [1]
- To set deadlines / manage time effectively [1]
- To monitor progress / see if tasks are on track [1]
- To secure finance / show planning to potential lenders [1]

1 mark for each valid reason stated (maximum of 2 marks).

Precise definition [2]
Partial definition showing some understanding [1]

Answers may include:
- The collection of second-hand data that already exists. [2]
- Using information that has already been collected by other organisations/sources. [2]
- Desk research / looking at reports on the internet. [1]
- Research that is not original or first-hand. [1]

2 marks for a precise definition.
1 mark for a partial definition.

Precise definition [2]
Partial definition showing some understanding [1]

Answers may include:
- Costs that change/vary with the level of output/production/sales. [2]
- Costs that go up as you make/sell more products. [1]
- Examples of variable costs such as raw materials or packaging. [1]

2 marks for a precise definition.
1 mark for a partial definition showing some understanding (e.g., stating it is a cost that changes, or giving a correct example without a clear definition).

1 mark per correct advantage stated, up to a maximum of 2 marks.

Advantages may include:
- Access to a large number of potential investors online. [1]
- No interest payments (unlike bank loans). [1]
- Acts as a form of free marketing / raises awareness of the enterprise. [1]
- Helps to gauge public interest / test the market. [1]
- No need to give up control/shares of the business (depending on the type of crowdfunding, e.g., reward-based). [1]

1 mark for each valid advantage stated (maximum of 2 marks).

Precise definition [2]
Partial definition showing some understanding [1]

Answers may include:
- A business that trades to tackle social problems, improve communities, or protect the environment. [2]
- An enterprise whose main objective is to benefit society rather than make profit. [2]
- A business that reinvests its profits back into its social cause. [1]
- A non-profit-driven business. [1]

2 marks for a precise definition.
1 mark for a partial definition.

1 mark per correct legal obligation stated, up to a maximum of 2 marks.

Obligations may include:
- Providing a safe working environment / health and safety laws. [1]
- Paying the national minimum wage / fair pay. [1]
- Ensuring no discrimination (based on gender, race, disability, etc.) during recruitment or employment. [1]
- Providing a written contract of employment. [1]
- Adhering to maximum working hours / providing mandatory break times. [1]

1 mark for each valid legal obligation stated (maximum of 2 marks).

Kofi must comply with food hygiene and safety regulations [1]. This ensures that any food prepared is safe for human consumption and prevents health issues like food poisoning [1]. In his home bakery, he will need to ensure his kitchen meets official cleanliness standards before he can sell any cakes or bread to the public [1].

1 mark for identifying a relevant legal obligation (e.g. food safety/hygiene, accurate ingredient labeling, business registration).
1 mark for explanation showing understanding of the obligation's purpose.
1 mark for application to Kofi's home bakery enterprise.

Sarah could introduce a loyalty card scheme [1]. This rewards customers for their repeat business by offering a free class or discount after a certain number of visits [1]. This will encourage her existing yoga clients to continue booking her classes rather than going to a rival fitness instructor [1].

1 mark for identifying a valid customer retention action (e.g. loyalty scheme, gathering feedback, offering discount for block bookings).
1 mark for explanation of how it retains customers.
1 mark for application to Sarah's yoga classes.

Posters can be easily ignored or covered up by other notices on school boards [1]. This means that the target audience may not see the advertisement [1]. Consequently, students and teachers might not find out about the date and location of Maya's charity car wash, resulting in fewer customers [1].

1 mark for identifying a disadvantage of posters.
1 mark for explaining the impact/disadvantage of this communication method.
1 mark for application to Maya's charity car wash.

Positive working capital is needed to meet day-to-day cash expenses as they fall due [1]. This prevents the business from becoming illiquid or unable to trade [1]. For Javier, this ensures he has the cash available to purchase spare bicycle chains or tyres immediately, without having to make customers wait [1].

1 mark for identifying a reason for maintaining positive working capital (e.g., paying short-term expenses, buying stock/inventory).
1 mark for explanation of its importance to liquidity or survival.
1 mark for application to Javier's bicycle repair workshop.

Oral communication allows for instant two-way feedback [1]. This means any questions can be resolved immediately without delay [1]. The enterprise team can instantly find out if the principal agrees to the new date or if it clashes with another school event, allowing them to adjust plans on the spot [1].

1 mark for identifying a valid advantage of oral communication (e.g. immediate feedback, body language, personal touch).
1 mark for explaining why it is an advantage over written communication.
1 mark for application to the context of the school principal and the event date change.

New businesses often face low customer awareness and high initial start-up costs [1]. Therefore, they must focus on covering basic costs to avoid running out of cash and closing down [1]. For the candle enterprise, their first-month priority will be to sell enough candles to pay back the cost of wax and moulds before they can think about making a profit [1].

1 mark for identifying a reason why survival is a key objective for start-ups (e.g. high initial costs, low customer awareness, cash flow pressure).
1 mark for explaining the impact of survival on business operations.
1 mark for application to the handmade candle start-up.

Random sampling means every member of the population has an equal chance of being chosen [1]. This can result in selecting respondents who are not part of the target market [1]. Arjun might end up surveying people who never play mobile games, resulting in irrelevant feedback for his app development [1].

1 mark for identifying a disadvantage of random sampling (e.g. not representative of the target market, expensive, time-consuming).
1 mark for explaining how this affects the quality or usefulness of research data.
1 mark for application to the mobile gaming app context.

Award 1 mark for each correctly identified stage of the enterprise process (up to 2 marks).
Award 1 mark for each correct application of the identified stage to the 'Nutri-Bites' snack stall (up to 2 marks).

Possible stages of the enterprise process and application include:
- **Identifying a problem or need** [1] when they realized there were no healthy snacks available for students on sports day [+1].
- **Exploring creative solutions** [1] when they decided to set up a snack stall called 'Nutri-Bites' [+1].
- **Planning** [1] when they created a schedule of tasks to prepare for the event [+1].
- **Implementing** [1] when they purchased the ingredients and ran the stall on sports day [+1].
- **Evaluating successes and failures** [1] when they calculated their total profit afterwards [+1].

Identification of a stage [1 mark] x 2
Application to 'Nutri-Bites' scenario [1 mark] x 2
Total: 4 marks

Award 1 mark for each correct customer retention method identified (up to 2 marks).
Award 1 mark for explaining how each method applies to the 'QuickFix' repair service (up to 2 marks).

Possible methods and application include:
- **Loyalty rewards / repeat discounts** [1]: Maya could give a voucher for 10% off accessories to screen-repair customers [+1].
- **After-sales service / guarantees** [1]: offering a 30-day warranty on repairs, which builds trust and peace of mind [+1].
- **Excellent customer service / dealing with complaints quickly** [1]: ensuring screens are replaced efficiently while keeping the customer updated on the status [+1].

Identification of a method [1 mark] x 2
Explanation of application to 'QuickFix' [1 mark] x 2
Total: 4 marks

To find the value of Y, multiply the number of booklets by the cost per booklet: 15 booklets * US$6 = US$90.

1 mark for the correct calculation: 15 * 6 = 90. Accept: 90 or US$90.

1. **Identify Total Fixed Costs (FC):**
\(\text{Stall rental} + \text{Equipment hire} = \text{US\$30} + \text{US\$15} = \text{US\$45}\)

2. **Identify Total Variable Cost per unit (VC):**
\(\text{Ingredients} + \text{Packaging} = \text{US\$1.20} + \text{US\$0.30} = \text{US\$1.50}\)

3. **Calculate Contribution per Unit:**
\(\text{Selling Price (P)} - \text{Variable Cost (VC)} = \text{US\$3.00} - \text{US\$1.50} = \text{US\$1.50}\)

4. **Calculate Break-Even Point in units:**
\(\text{Break-Even} = \frac{\text{Fixed Costs}}{\text{Contribution per Unit}} = \frac{\text{US\$45}}{\text{US\$1.50}} = 30\text{ cupcakes}\)

Marks are awarded as follows:
* **[1 mark]** for identifying total Fixed Costs (US$45)
* **[1 mark]** for identifying Variable Cost per unit (US$1.50) OR Contribution per unit (US$1.50)
* **[1 mark]** for showing a correct formula or method of calculation (e.g., \(\frac{\text{Fixed Costs}}{\text{Selling Price} - \text{Variable Cost}}\))
* **[1 mark]** for the correct final answer of 30 cupcakes (with or without units)

One disadvantage of crowd-funding is that platforms often operate on an 'all-or-nothing' basis. If Sanjay and Priya do not meet their full funding target of $500, they will not receive any of the money pledged, which will delay the purchase of their bicycle tools and the launch of their service.

Identification of a disadvantage [1 mark]
Explanation showing application to the scenario [+1 mark]

Answers may include:
- They may need to offer rewards to backers [1] such as a free bicycle tune-up, which will reduce their future service revenue [+1]
- Platform fees are charged on the funds raised [1] which means they will have less than the $500 needed to purchase all the tools [+1]
- If they fail to reach the $500 goal, they may receive nothing [1] which prevents them from launching the repair service [+1]
- Publicizing the idea online can lead to competitors copying their mobile repair model [1] before Sanjay and Priya even establish their brand [+1]

Level 3 (8-10 marks): Good analysis consistently applied to the scenario. Demonstrates good knowledge of concepts. The candidate clearly explains the impact of both selected skills on the successful launch of Raj's mobile repair service. For example, for creativity: Raj could design a specialized trailer that attaches to his own bicycle, showing customers his commitment to green transport and solving his tool-carrying issue. This unique branding could help attract his first customers. For time management: Traveling between appointments requires strict scheduling to avoid delays. If Raj manages his travel times well, he can fit in more repairs per day, which directly maximizes his starting revenue. Level 2 (4-7 marks): Some analysis supported by good application to the scenario. Demonstrates knowledge of concepts. The candidate applies the skills to Raj's situation, but the explanation of the impact/outcomes is limited or unbalanced. For example: Raj will need perseverance to keep looking for customers even if nobody books him in the first week. This keeps him motivated. Level 1 (1-3 marks): Limited application to the scenario. Demonstrates knowledge of concepts. The candidate defines the skills or makes very simple statements showing how Raj might use them. For example: Creativity means coming up with new ideas. Raj will need this to think of ways to fix bikes.

Level 3 (8-10 marks): Good analysis consistently applied to the scenario. Demonstrates good knowledge of concepts. Level 2 (4-7 marks): Some analysis supported by good application to the scenario. Demonstrates knowledge of concepts. Level 1 (1-3 marks): Limited application to the scenario. Demonstrates knowledge of concepts. Level 0 (0 marks): No creditable response.

Level 3 (8-10 marks): Good analysis consistently applied to their own enterprise experience. Demonstrates good knowledge of concepts. The candidate analyses how both risks actually affected, or could have affected, their specific project, discussing the consequences on the enterprise's performance. For example, for operational risk: In our handmade candle project, we relied on a single electric wax melting pot. If this had broken (operational risk), production would have ceased immediately, meaning we could not have fulfilled our pre-orders for the winter fair. This would have caused us to lose revenue and customer trust. For health and safety risk: Working with hot wax carried a serious risk of burns. We had to establish a clear safety rule of wearing heat-resistant gloves. If we hadn't, a team member could have been injured, which would have shut down our production line and could have led to school authorities canceling our stall. Level 2 (4-7 marks): Some analysis supported by good application to their own enterprise experience. Demonstrates knowledge of concepts. The candidate describes how the risks occurred or could have occurred in their project, but the analysis of the knock-on effects is limited. For example: We had a financial risk that we wouldn't sell enough candles to pay back our USD 20 start-up loan, which made us worried about pricing our candles too high. Level 1 (1-3 marks): Limited application to their own enterprise experience. Demonstrates knowledge of concepts. The candidate shows basic knowledge of the risk types but provides minimal or generic link to their own project. For example: Reputational risk is when people don't like your business. We had to make sure our products were good so this didn't happen.

Level 3 (8-10 marks): Good analysis consistently applied to their own enterprise experience. Demonstrates good knowledge of concepts. Level 2 (4-7 marks): Some analysis supported by good application to their own enterprise experience. Demonstrates knowledge of concepts. Level 1 (1-3 marks): Limited application to their own enterprise experience. Demonstrates knowledge of concepts. Level 0 (0 marks): No creditable response.

Crowdfunding allows the enterprise to raise small contributions from many people. This creates community interest and serves as marketing, but it may take too long to reach the US$500 target. A bank overdraft is quick but carries very high interest rates and is unlikely to be approved for a student group with no business history. A personal loan from family is likely interest-free and flexible, but might cause personal conflict if the shop fails. Sponsorship from a local green business provides free funds with no repayment, but requires finding a willing business and offering them promotion. Evaluation: Personal loans from family and sponsorship are the most appropriate. The loan is secure and low-cost for immediate stock, while sponsorship aligns with the green theme of the biodegradable products, providing free marketing and capital without debt.

Level 4 (12-15 marks): Two-sided analysis of two options, leading to a supported judgment on suitability for a school-based eco-stationery shop needing US$500. Level 3 (8-11 marks): Analytical points showing how specific features of the sources of finance affect this enterprise. Level 2 (4-7 marks): Application points linking finance types to the shop scenario. Level 1 (1-3 marks): Identifies advantages/disadvantages of the sources of finance.

In our handmade candle enterprise, we used face-to-face weekly meetings (internal) and Instagram direct messaging (external). Face-to-face meetings allowed us to resolve conflicts about pricing immediately through verbal discussion and non-verbal cues, ensuring all four team members remained motivated. However, they were time-consuming. Instagram messaging allowed us to reach over 100 potential customers quickly and share photos of our candles, which directly resulted in 25 pre-orders. However, some customer queries went unanswered for days because no single person was assigned to monitor the account. Evaluation: While Instagram was vital for generating sales revenue, face-to-face communication was the most critical for overall success because it maintained team cohesion and prevented production delays.

Level 4 (12-15 marks): Detailed, balanced evaluation of two communication methods, with a clear judgment on which method most influenced their project's success. Level 3 (8-11 marks): Analysis of how the chosen methods of communication affected the operations, teamwork, or customer reach of their enterprise. Level 2 (4-7 marks): Application of communication concepts with specific examples from their own project. Level 1 (1-3 marks): Descriptive points about communication methods used.