2025 Cambridge IGCSE Enterprise (0454) Practice Paper with Answers

1. Conducting customer surveys or questionnaires [1]
2. Monitoring the number of customer complaints [1]

1 mark for each correct method stated, up to a maximum of 2 marks.

1. It provides clear focus and direction for the enterprise [1]
2. It helps measure progress and evaluate success over time [1]

1 mark for each valid reason stated, up to a maximum of 2 marks.

A cost that changes [1] directly with the level of output or production [1].

1 mark for identifying that it changes/varies.
1 mark for linking it to the level of output, sales or production.

1. Access to a large number of potential investors [1]
2. Acts as a marketing and publicity tool for the product [1]

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

1. Details of the target market [1]
2. Description of competitor analysis [1]

1 mark for each correct item of information stated, up to a maximum of 2 marks.

1. Paying at least the legal minimum wage [1]
2. Providing a safe and healthy working environment [1]

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

Sourcing materials from Fairtrade certified suppliers [1] to ensure producers are paid a fair wage and work in safe conditions [+1].

1 mark for identifying a valid ethical sourcing method.
1 mark for explaining how/why it is ethical (showing understanding).

1. To seize new business opportunities [1]
2. Because taking calculated risks can lead to high financial rewards and returns [1]

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

Working capital represents the liquid funds available for the day-to-day operations of an enterprise. It is calculated by subtracting current liabilities from current assets.

Award 1 mark for identifying it as money for day-to-day operations/costs.
Award 1 mark for stating it is calculated as current assets minus current liabilities (or explaining it is used to pay short-term debts).

Market segmentation is dividing a broad target market into distinct, manageable groups of consumers who share common characteristics (such as age, gender, income or interests).

Award 1 mark for the concept of dividing/splitting a larger market/customers into groups.
Award 1 mark for explaining that these groups share similar characteristics/needs/buying habits.

Enterprises can reduce risk by:
1. Purchasing insurance policies to cover potential liabilities or losses.
2. Doing market research to understand customer demand before launching a product.

Award 1 mark for each valid method identified, up to a maximum of 2 marks.
Points may include:
- Taking out insurance
- Market research / feasibility studies
- Creating a business plan / financial forecast
- Diversifying products/services
- Training staff
- Undertaking risk assessments

Delegation is key because it allows entrepreneurs to save time by passing routine duties to other team members. It also increases staff motivation and trust as they are given ownership of their tasks.

Award 1 mark for each valid reason stated, up to a maximum of 2 marks.
Points may include:
- Saves time / reduces workload for the entrepreneur
- Allows focus on core strategic/important activities
- Motivates employees / increases trust
- Utilises specialised skills of staff members
- Helps the business scale and operate when the entrepreneur is absent

Maya's contribution per mug is: \(\text{Selling Price} - \text{Variable Cost} = \$12.00 - \$4.50 = \$7.50\). To calculate the break-even quantity: \(\text{Fixed Costs} / \text{Contribution per Mug} = \$150 / \$7.50 = 20\) mugs.

4 marks total. 20 mugs [4 marks]. If the final answer is incorrect, marks can be awarded as follows: Correct formula for break-even: \(\text{Fixed Cost} / \text{Contribution}\) [1 mark]. Calculation of contribution per unit: \(\$12.00 - \$4.50 = \$7.50\) [1 mark]. Correct setup with numbers: \(150 / 7.50\) [1 mark].

First, calculate Total Revenue: \(80 \times \$4.00 = \$320\). Next, calculate Total Variable Cost: \(80 \times \$1.75 = \$140\). Calculate Total Cost: \(\text{Fixed Cost} + \text{Total Variable Cost} = \$60 + \$140 = \$200\). Calculate Total Profit: \(\text{Total Revenue} - \text{Total Cost} = \$320 - \$200 = \$120\). Alternatively, Profit per soap: \(\$4.00 - \$1.75 = \$2.25\). Total Profit: \((80 \times \$2.25) - \$60 = \$180 - \$60 = \$120\).

4 marks total. \(\$120\) [4 marks]. If the final answer is incorrect, marks can be awarded as follows: Calculation of Total Revenue: \(80 \times \$4.00 = \$320\) [1 mark]. Calculation of Total Variable Cost: \(80 \times \$1.75 = \$140\) [1 mark]. Calculation of Total Cost: \(\$60 + \$140 = \$200\) [1 mark].

We had a challenge where our initial budget was too small to afford professional printed packaging for our handmade soaps (Identification of challenge [1]). We solved this by using our creativity to hand-stamp recycled brown paper bags with our logo instead (How creativity was applied [+1]). This gave our soaps a unique, rustic look that customers loved at our school fair (Example from own project [1]).

Identification of a challenge / creative idea [1]
Explanation of how creativity was applied to address the challenge [+1]
Specific example from own enterprise project [1]

Max 3 marks.

An advantage is having complementary skills and a shared workload (Identification of advantage [1]). In a fitness business, Chloe can focus on conducting personal training sessions while her partner handles the administrative tasks like bookings and accounting (+1). This ensures that clients receive excellent service while the business operations are managed efficiently (Application to fitness business [1]).

Identification of an advantage of a partnership [1]
Explanation showing understanding of the advantage [+1]
Application to Chloe's fitness training business [1]

Max 3 marks.

Leo could implement a pre-ordering system with clients before events (Identification of action [1]). By requiring clients to submit exact guest counts and menu choices in advance, he can calculate the precise amount of ingredients required (+1). This prevents him from over-purchasing fresh food items that would otherwise spoil and have to be thrown away (Application to catering/food wastage [1]).

Identification of a risk reduction strategy [1]
Explanation showing how the strategy reduces risk [+1]
Application to Leo's catering/food wastage context [1]

Max 3 marks.

Our group used demographic segmentation based on age to divide our potential customers (Identification of segmentation method [1]). We realized that younger students had less disposable income but wanted fun items, while parents had more money (+1). Consequently, we designed cheap $1 customized badges specifically for the primary school students to match their budget (Example from own project [1]).

Identification of a method of market segmentation [1]
Explanation of how segmentation helped target customers [+1]
Specific example from own enterprise project [1]

Max 3 marks.

Before negotiating, we researched the wholesale prices of ingredients from three different local suppliers (Identification of preparation technique [1]). Knowing these competitive prices gave us objective evidence to show our preferred supplier (+1). This allowed us to successfully negotiate a 15% discount on flour and sugar for our bake sale project (Example from own project [1]).

Identification of a negotiation preparation technique [1]
Explanation showing how preparation helped the negotiation [+1]
Specific example from own enterprise project [1]

Max 3 marks.

To achieve a successful outcome, Amira must prepare thoroughly: 1. Set clear objectives and limits: Knowing her maximum limit (e.g., $4 per bottle) ensures she does not agree to a deal that exceeds her limited startup capital. 2. Prepare evidence: Amira can use her market research showing strong local demand to persuade BambooCraft that they will benefit from high future order volumes, justifying a lower unit price. 3. Establish a BATNA: Knowing her alternative suppliers gives her the confidence to walk away if BambooCraft refuses to offer the 30-day trade credit required to manage her cash flow.

Level 3 (8-10 marks): Good analysis consistently applied to the case study. Candidates will analyze how preparation (such as gathering market research or setting a clear walk-away point) helps Amira build persuasive arguments or protect her financial position, leading to a successful deal. Level 2 (4-7 marks): Some analysis supported by good application to the case study. Candidates apply preparation techniques to Amira's bamboo bottle business but the link to the final outcome is weak. Level 1 (1-3 marks): Identifies preparation steps (e.g., setting targets, research) but lacks application or analysis.

Candidates should apply this to their own project. For example: 1. Financial risk: We identified the risk of failing to cover our costs due to unsold food stock. To manage this, we conducted pre-orders, which secured guaranteed revenue and minimized waste, directly ensuring a profitable outcome. 2. Resource risk: We identified the risk of team members being absent on the day of the sale. We managed this by cross-training all members in every role, which saved our operations when one classmate fell ill, ensuring smooth customer service.

Level 3 (8-10 marks): Good analysis consistently applied to their own enterprise experience. Candidates will examine two specific risks from their project, detailing how identification allowed proactive measures and how management actions avoided negative impacts or failures. Level 2 (4-7 marks): Some analysis of risk management with application to their own enterprise. Explains risk handling but lacks depth on how this drove the final project outcome. Level 1 (1-3 marks): Simple identification of risks or basic mitigation steps with little or no analysis of project impact.

Candidate responses should show the following calculations and analysis:

**Financial Calculations:**
- Selling Price per unit = $15
- Variable Cost per unit = $7
- Contribution per unit = $15 - $7 = $8
- Weekly Fixed Costs = $120
- Weekly Break-even Point = $120 / $8 = 15 pencil cases per week.
- Bank Loan Cost: Interest = $100 ($1000 * 10%), total repayable = $1100 over a year.
- Partnership Cost: 30% of all profits. If weekly sales are high (e.g., 50 units), weekly profit = (50 * $8) - $120 = $280. 30% of this is $84 per week, which is much more expensive than the loan interest over a year.

**Analysis of Bank Loan:**
- **Pros:** Maya retains full ownership and control of TrendPencil. Once the loan and interest are paid, she owes nothing more.
- **Cons:** Interest of $100 is a fixed commitment. If sales fall below the break-even of 15 units, she still has to make repayments, risking personal bankruptcy if she has unlimited liability.

**Analysis of Partnership:**
- **Pros:** No fixed repayment pressure or interest costs. The partner brings additional skills and shares the workload of hand-painting.
- **Cons:** Sharing 30% of profits permanently. High risk of interpersonal conflict regarding creative choices or business direction.

**Evaluation:**
If Maya is confident in her ability to regularly sell more than 15 pencil cases a week (and hence make comfortable profits), the bank loan is the better option because a partnership will cost her significantly more in profit-sharing over the long run. However, if sales are highly volatile, a partnership offers safety since she won't be burdened with fixed debt repayments.

**Level 4 (12–15 marks):** Clear, reasoned evaluation is present. Good analysis applied consistently to the scenario. Calculations (contribution of $8, break-even of 15 units, interest of $100) are accurate and fully integrated into a balanced comparison of both options before making a logical recommendation.

**Level 3 (8–11 marks):** Good analysis applied to the scenario leading to a choice. Student computes the break-even point or loan costs correctly and analyzes at least one advantage and disadvantage of both sources of finance.

**Level 2 (4–7 marks):** Some application to the scenario supported by basic analysis. Contains minor mathematical errors but demonstrates understanding of break-even concept or discusses basic pros/cons of loans vs partnerships.

**Level 1 (1–3 marks):** Limited application or purely descriptive comments about loans, partnerships, or business costs. Little to no useful calculations.

An effective response must be written in the context of the student's own enterprise project.

**Example response structure:**
- **Introduction:** Identify the student's enterprise (e.g., selling handmade soap) and state the ethical goals (e.g., using zero-plastic packaging and cruelty-free ingredients) alongside the alternative challenge (e.g., financial limitations/budgeting).
- **Analyzing Ethical Challenges:** Sourcing cruelty-free organic oils and paper packaging meant raw material costs were 40% higher. Finding certified local suppliers who could supply small quantities was extremely difficult, which almost delayed production.
- **Analyzing the Competing Challenge (Financial limitations):** We only had a start-up budget of $50 raised from personal savings. This made it difficult to purchase bulk ingredients to lower unit costs. We could not afford any paid marketing and had to rely entirely on word-of-mouth.
- **Comparison & Synthesis:** The financial constraint was directly worsened by our ethical choices; if we had used standard chemical ingredients and plastic wraps, our start-up costs would have been halved, and our profit margins would have been much wider.
- **Conclusion/Evaluation:** Ethical considerations were indeed the root and most significant challenge because they dictated all our financial and supply chain struggles. However, prioritizing ethics ultimately formed our unique selling point (USP) and allowed us to charge a premium price, which helped us overcome the financial limitations in the end.

**Level 4 (12–15 marks):** Clear, reasoned evaluation is present, focusing on the student's own project. Good analysis of how ethical considerations impacted the enterprise compared to another specific challenge. The evaluation clearly judges 'to what extent' ethics was the primary issue.

**Level 3 (8–11 marks):** Good analysis applied consistently to their own enterprise experience. Discusses both ethical challenges and an alternative challenge with clear examples, leading toward an evaluation.

**Level 2 (4–7 marks):** Some application to their own enterprise experience supported by limited analysis. Simple description of the ethical choices made and/or another problem faced during the project.

**Level 1 (1–3 marks):** Limited application. General statements about what ethics or challenges mean in business, without specific connection to their own project's operations.