EDEXCEL GCSE BUSINESS · PAPER 2
Exam Practice: Business Calculations
Business calculations · Making financial decisions · Lesson 1 of 2 · 14 marks · 25 minutes
Name Date
Answer all questions. Show your working in calculations.
Question 1 DEFINE [1 mark]
Define the term 'gross profit'.
Question 2 CALCULATE [2 marks]
A business has sales revenue of £800,000 and cost of sales of £480,000. Calculate its gross profit margin. You are advised to show your working.
Question 3 CALCULATE [2 marks]
The same business has other operating expenses of £200,000 and interest of £16,000. Calculate its net profit margin. You are advised to show your working.
Question 4 EXPLAIN [3 marks]
Explain one way a business could increase its gross profit margin.
Question 5 ANALYSE [6 marks]
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SOURCE Fresh Plate Ltd runs three restaurants. This year its sales revenue rose from £900,000 to £1,000,000. Its gross profit margin stayed at 65%, but its net profit margin fell from 12% to 8%, because rent, energy bills and managers' salaries all rose. |
Analyse the financial performance of Fresh Plate Ltd this year.
Answers
Check your answer only once you have written one.
Question 1 [1 mark]
Sales revenue minus the cost of sales.
▸ Revenue - cost of sales 1 mark
Question 2 [2 marks]
Gross profit = £800,000 - £480,000 = £320,000. GPM = (£320,000 ÷ £800,000) × 100 = 40%
▸ Correct method: (revenue - cost of sales) ÷ revenue × 100 1 mark
▸ Correct answer: 40% 1 mark (award 2 marks for the correct answer with no working)
Question 3 [2 marks]
Net profit = £320,000 - £200,000 - £16,000 = £104,000. NPM = (£104,000 ÷ £800,000) × 100 = 13%
▸ Correct method: net profit ÷ revenue × 100 1 mark
▸ Correct answer: 13% 1 mark (own figure rule applies)
Question 4 [3 marks]
It could find a cheaper supplier (1). This would reduce its cost of sales while its selling prices stay the same (1). As a result each sale produces more gross profit, so the gross profit margin rises (1).
▸ A way identified, e.g. cheaper supplier / raise prices / reduce waste 1 mark
▸ First linked point of explanation 1 mark
▸ Second linked point of explanation 1 mark
Question 5 [6 marks]
Fresh Plate's sales revenue rose by £100,000, which shows its restaurants are attracting more customers. Its gross profit margin stayed at 65%, so it is controlling the cost of its food and drink well and making the same profit on each meal. However, its net profit margin fell from 12% to 8%. Net profit fell from £108,000 to £80,000, even though revenue rose. This is because its other operating expenses - rent, energy and managers' salaries - rose faster than its gross profit. This means Fresh Plate's problem is overheads, not its menu, so it needs to control its running costs to improve its profit.
▸ AO2 (Application, 3 marks): uses the figures - revenue £900,000 to £1,000,000, GPM 65%, NPM 12% to 8% Level 1-3
▸ AO3a (Analysis, 3 marks): chains of reasoning interpreting the margins Level 1-3