Professional Documents
Culture Documents
The following practice exam covers Areas of Study 1 and 2 in VCE Business
Management Unit 1. As Area of Study 3 (Day-to-day operations) contains
optional topic areas, teachers may modify the exam to cater for the
optional areas they have covered.
The practice exam consists of three sections and is presented in the form of
a question-and-answer book. All questions are compulsory. The total marks
available are 100.
Several questions are introduced with stimulus material. The number of
lines provided after each question and the number of marks allocated to
each question indicate the appropriate length of a response.
Additional space is provided at the end of the question-and-answer book.
The practice exam and suggested answers are based on the author's
interpretation of the VCE Business Management Study Design.
Teachers are advised to preview all practice exam material before
distributing it to students.
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Number of questions to
be answered
Number of marks
10
10
Section B: Multiple-choice
questions
10
10
80
Section C: Short-answer
questions
Students are permitted to bring into the examination room: pens, pencils, highlighters, erasers,
sharpeners and rulers.
Students are NOT permitted to bring into the examination room: blank sheets of paper and/or
white-out liquid/tape.
No calculator is allowed in this examination.
Materials supplied
Question and answer book.
Additional space is available at the end of the book if you need extra paper to complete an answer.
Clearly label all answers with the appropriate section and question number.
Instructions
All written responses must be in English.
Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic
devices into the examination room.
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Instructions
Answer all questions in the spaces provided.
True or false
1 Angelinas Baby Supplies Ltd is a retailer of imported childrens clothing and accessories.
This is an example of a business in the secondary industry sector.
2 A for-profit organisation need not be concerned about ethical and social responsibility
issues.
3 Small business represents 95% of the total number of businesses in Australia.
4 A micro business will always employ three or fewer people.
5 A public sector organisation is always government owned.
6 Unlimited liability is an advantage offered by the incorporation of a business by its
owners.
7 Shareholders are a category of business stakeholder.
8 A small business owner has total control over the macro environment of the business.
9 Writing a good business plan will ensure business success.
10 All businesses must obtain an Australian Business Number from the Australian Taxation
Office.
Total: 10 marks
Question 1
The term that is used to describe the voluntarily closing down of a business due to an inability to meet
its financial commitments is:
A.
bankruptcy.
B.
insolvency.
C.
social responsibility.
D.
efficiency.
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Question 2
A large department store such as David Jones or Myer is part of which industry sector?
A.
primary sector
B.
secondary sector
C.
service/tertiary sector
D.
financial sector
Question 3
Screamers Child Minding Services Pty Ltd employs 10 people as part-time child care workers. This is
an example of:
A.
B.
C.
D.
Question 4
A restaurant that employs 25 staff would be classified by the Australian Bureau of Statistics as:
A.
micro.
B.
small.
C.
medium.
D.
large.
Question 5
An example of a stakeholder group from the operating environment of a business is:
A.
B.
C.
D.
Question 6
A franchise operation will:
A.
incur extra monthly fees and charges for the business owners.
B.
always succeed.
C.
allow the small business owner greater control over the business operations.
D.
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Question 7
The letters Pty Ltd after the name of a business signify:
A.
B.
that the business owners have limited liability for the debts of the business.
C.
D.
Question 8
The most appropriate complementary business to be located next to an Internet cafe would be:
A.
a bookshop.
B.
a budget hotel.
C.
an ice-cream shop.
D.
a dance school.
Question 9
Strategic planning is:
A.
B.
optional.
C.
D.
Question 10
An appropriate key performance indicator to measure the occupational health and safety performance
of a business would be:
A.
net profit.
B.
market share.
C.
D.
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Potters Pty Ltd operates a chain of three magic shops in the northern suburbs of Melbourne. The
business employs 15 people in customer service. The business sells supplies of equipment to both
performing and amateur magicians. It also conducts childrens birthday parties on each of the
premises for a fixed fee. Owner/managers Jim and Gemma have recently made the decision to
expand the business and become franchisors. They have advertised for potential franchisees for a
new outlet. The business has a stated mission of meeting the expectations of its stakeholders.
1 mark
b. Name and outline the interests and expectations held for Potters Pty Ltd of one stakeholder group
from each of the following environments of Potters Pty Ltd.
i. internal environment
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3 x 2 = 6 marks
c. Identify and explain at least one factor that demonstrates that Potters Pty Ltd would be classified
as a small business by the Australian Bureau of Statistics.
2 marks
d. Explain what the letters Pty Ltd denote about the ownership structure of this business. Discuss the
advantages that this form of ownership structure has for the owners of the business.
3 marks
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e. Jim and Gemma are intending to franchise this business. Explain what this means and the
implications for them and the franchisee that purchases the new branch of Potters Pty Ltd. In your
answer, explain at least two advantages and two disadvantages of purchasing a franchise rather
than starting a new business from scratch for the new franchisee.
8 marks
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f. Suggest and justify an appropriate location for the new outlet of Potters Pty Ltd. In your response,
consider each of the following factors.
i. the location requirements for a retail outlet
ii. the requirements for conducting childrens birthday parties in terms of location
4 marks
Total: 24 marks
Question 2
Using the stimulus material provided, as well as your own knowledge, answer the following questions
in the spaces provided.
Marco and Matthew are two friends thinking of starting a small business in partnership. Marco has
extensive experience in customer service and Matthew has worked in hospitality for five years. After
investigating several options for entering small business, the two friends decide on a small cafe/coffee
shop as the best option for them. Further investigation indicates three options:
i. opening up a new cafe in an empty shop at the local strip shopping centre
ii. purchasing an existing and moderately successful cafe/coffee shop at a large shopping mall in the
next suburb
iii. becoming a franchisee for a successful group of coffee shops (Brazilian Blue).
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a. List and describe three skills and/or qualities that would be advantageous for the owners of the
type of business described above to possess. In your answer, explain how each skill or quality
mentioned would benefit the business owners.
6 marks
b. Which option for embarking on small business ownership would you recommend be adopted by
Marco and Matthew as having the most chance of financial success? Give reasons for your
answer.
2 marks
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c. Which option would you advise if Matthew and Marco were considering an innovative idea, such
as a new type of cuisine for their cafe? Give reasons for your answer.
2 marks
d. Which option is likely to be the most expensive in terms of establishment and operating costs?
Give reasons for your answer.
2 marks
e. Explain what a feasibility study is. Would you recommend that Marco and Matthew conduct a
feasibility study before embarking on this business venture? Give reasons for your answer.
3 marks
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After conducting a feasibility study the two partners decide to write a business plan.
f. Explain what a business plan is. Discuss two advantages of writing a business plan for a small
business owner.
3 marks
g. Identify two potential sources of support, advice and assistance in establishing and operating a
small business that the two owners of this business could utilise for little or no cost.
2 marks
Total: 20 marks
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Question 3
Identify a complementary business that the owners of each of the following businesses would want to
be located near. In each case, explain the complementary effect that the businesses would have on
each other.
a. a pharmacy
b. a milk bar
c. a fast-food outlet
Total: 3 x 2 = 6 marks
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Question 4
Using the stimulus material provided, as well as your own knowledge, answer the following questions
in the spaces provided.
Norkids Pty Ltd is a small business that offers child care for children aged from six weeks to six years.
a. Outline one way each of the following types of laws is likely to affect Norkids Pty Ltd.
i. local government by-laws
3 x 2 = 6 marks
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b. Explain two instances in which the owners of Norkids might require the services of a lawyer.
2 marks
c. List and describe two different types of suppliers that Norkids would depend on. Explain the
importance of reliable suppliers of good-quality supplies at competitive prices to a business like
Norkids.
4 marks
d. Describe two market research strategies that the owners of Norkids could have used before
commencing the business. What types of information would each strategy provide?
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4 marks
Total: 16 marks
Question 5
a. Explain what a key performance indicator is. Discuss how key performance indicators are used by
business.
2 marks
b. Explain and justify an appropriate key performance indicator to measure each of the following
aspects of the performance of a business.
i. financial performance
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2 + 2 = 4 marks
Total: 6 marks
Question 6
Using the stimulus material provided, as well as your own knowledge, answer the following question
in the spaces provided.
Trang, Mohammed and Emma decided to go into business together. From the time that they made
this decision to the time the doors of the business actually opened was 12 months. One year later the
business recorded its first monthly profit.
Outline four types of decisions that the owners of this new business would have made during the 12
months leading up to the business opening and four types of decisions they would have made during
the first 12 months of the business operating.
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Total: 8 marks
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10
10
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f. Suggest and justify an appropriate location for the new outlet of Potters Pty Ltd. In your
response consider the following factors. (4 marks)
i. the location requirements for a retail outlet
ii. the requirements for conducting childrens birthday parties in terms of location
2 marks for identifying and explaining one appropriate location factor for a retail business. 2 marks
for identifying and explaining one location requirement for a business holding childrens birthday
parties.
The business is a retailer and requires a position that maximises visibility and therefore sales, that
is, an area with a high volume of passing foot and vehicle traffic. The business would attract both
impulse buys and planned purchases, therefore visibility is important.
The availability of parking and easy access to the premises is essential for the childrens birthday
parties. A large amount of floor space is also necessary. Occupational health and safety
considerations for children are another requirement, such as nearby pedestrian crossings, toilet
facilities, no hazards on the premises, and safe access points. In addition, an online presence
would assist with sales.
Question 2
a. List and describe three skills and/or qualities that would be advantageous for the owners of
the type of business described above to possess. In your answer, explain how each skill or
quality mentioned would benefit the business owners. (6 marks)
3 x 1 marks for an accurate definition and description of three relevant skills or qualities. 3 x 1
marks for accurately showing how each skill/quality could be useful to a small business operator.
Examples of skills include: communication skills are required when serving customers (customer
service skills), dealing with staff, and marketing the services of the business; communication and
negotiation skills would be needed when dealing with suppliers; decision-making skills would be
needed when planning any changes to the business; basic accounting or financial management
skills would needed to manage the finances of the business; organisational skills would be needed
to manage the resources of the business; and food preparation and coffee-making skills
(hospitality skills) would be needed by the owner/operators.
b. Which option for embarking on small business ownership would you recommend be
adopted by Marco and Matthew as having the most chance of financial success? Give
reasons for your answer. (2 marks)
Students may recommend any option, providing they are able to provide a logical justification.
An existing business, especially a successful one, may have more chance of ongoing success as it
has established customers, a reliable income, a network of contacts including suppliers, trained
employees and an established reputation (goodwill).
A franchise may be the best choice as it offers a proven operations system, brand recognition, an
established image, training, and assistance with business set-up.
A new business may be the best option if it is based on an innovative concept; start-up costs may
be lower than a franchise or an established business; new staff can be trained from scratch to
meet the expectations of the new business; there is no history to overcome that may disadvantage
the new business; and the owners will have more flexibility about where to locate the business.
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c. Which option would you advise if Matthew and Marco were considering an innovative idea,
such as a new type of cuisine for their cafe? Give reasons for your answer. (2 marks)
The best option for a business plan based on an innovative idea would be to start a business from
scratch. The owners will have the flexibility to develop the business concept in a way that is unique
and will not be limited by either the restrictions that are associated with a franchise or the history of
an established business. A franchise, in particular, will not allow for the innovation.
d. Which option is likely to be the most expensive in terms of establishment and operating
costs? Give reasons for your answer. (2 marks)
Any of the three options could be the most expensive. Starting a business from scratch means that
all resources and equipment needed for the business will have to be purchased. Purchasing an
existing business will include the cost of the goodwill that has been developed. On the other hand,
purchasing a franchise includes an up-front purchasing fee and supply costs, as well as ongoing
monthly fees based on sales.
e. Explain what a feasibility study is. Would you recommend that Marco and Matthew conduct
a feasibility study before embarking on this business venture? Give reasons for your
answer. (3 marks)
1 mark for definition. 2 marks for recommendation with valid reasons.
A feasibility study is initial research that is conducted to ascertain whether a business idea is viable
(feasible) or not. A feasibility study reduces risk and gauges whether there is sufficient demand for
the product at the prices to be charged. It also identifies barriers to entering the market and
resources that will be required.
f. Explain what a business plan is. Discuss two advantages of writing a business plan for a
small business owner. (3 marks)
1 mark for definition of a business plan. 2 marks for discussing two advantages of preparing a
business plan.
A business plan is a document that sets out the details of a business or business proposal, the
direction the business intends to take and how it intends to achieve the goals.
The advantages of writing a business plan include: it clarifies and establishes clearly defined goals
and objectives; it helps to identify the risk involved; it helps the owners to determine if a product
has a sufficient market to support it and whether the venture will be profitable; it helps to keep the
business on track; it enables a realistic estimation of start-up costs and needed finance; having a
business plan will help the owners to obtain finance; it can be used to identify the competition in
the marketplace; and it enables a realistic assessment of the strengths and weaknesses of the
business idea.
g. Identify two potential sources of support, advice and assistance in establishing and
operating a small business that the two owners of this business could utilise for little or no
cost. (2 marks)
2 x 1 marks for identifying each source of support.
Examples: Business centres; industry associations; business mentors; previous owners; websites
such as the ATO website, business,gov.au, the Business Victoria website and the Department of
Innovation, Industry, Science and Research website (innovation,gov.au); TAFE business courses.
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Question 3
Identify a complementary business that the owners of each of the following businesses would
want to be located near. In each case, explain the complementary effect that the businesses
would have on each other. (3 x 2 = 6 marks)
3 x 1 marks for identifying a complementary business for each business type. 3 x 1 marks for
explaining why each business is complementary.
i. a pharmacy
A pharmacy would be complemented by a doctors surgery, as patients could have prescriptions
filled after a consultation. Another complementary business would be a community health centre.
ii. a milk bar
A milk bar would benefit from having a school nearby, as the milk bar could supply items to the
school such as milk, lunches, and students or parents could purchase items on the way home from
school.
iii. a fast-food outlet
A fast-food business might want to be located near a supermarket in a shopping centre to have
ready access to supplies and potential customers or near entertainment venues, such as a cinema
where people want to purchase food before or after seeing a movie.
Question 4
a. Outline one way each of the following types of laws is likely to affect Norkids Pty Ltd.
(3 x 2 = 6 marks)
2 marks for each accurate answer outlining the effects of each type of regulation.
i. local government by-laws
Local government by-laws include health regulations that are enforced by health inspectors;
other examples include laws relating to noise levels, fire hazards and parking.
ii. occupational health and safety laws
Occupational health and safety (OHS) laws aim to ensure that workplaces are safe for workers
and that any hazards are removedOHS inspectors enforce these.
iii. equal opportunity employment laws
Equal opportunity laws govern how workers are recruited and treated in the workplace; for
example, job advertisements cannot specify gender or religion, and job candidates cannot be
asked questions in job interviews that could be used to discriminate against them, such as
What are your child care arrangements? Employees who are discriminated against can lodge
a complaint with the Victorian Equal Opportunity & Human Rights Commission.
b. Explain two instances in which the owners of Norkids might require the services of a
lawyer. (2 marks)
Lawyers can be employed for: completing the legal requirements of changing the legal structure of
the business; managing compliance requirements associated with the existing private company
legal structure of the business; providing commercial law advice; representing the business in
court over a commercial dispute such as a breach of contract or to recover a debt; managing
intellectual property such as Norkids brand name or trademark, preparing documents relating to
commercial leasing or conveyancing related to the purchase of premises; preparing contracts with
suppliers.
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c. List and describe two different types of suppliers that Norkids would depend on. Explain
the importance of reliable suppliers of good-quality supplies at competitive prices to a
business like Norkids. (4 marks)
Any type of supplier can be described, providing it is relevant to the business. 2 marks for listing
two different suppliers. 2 marks for explaining the importance of reliable suppliers.
Examples: Nappy wash product suppliers, food suppliers, labour contractors, employment
agencies. Suppliers are crucial to a business. A suppliers unreliability will affect the ability of a
business to operate effectively, thus affecting its profitability. The quality of supplies will also
determine the quality of services that the business can provide, hence affecting its
competitiveness.
d. Describe two market research strategies that the owners of Norkids could have used before
commencing the business. What types of information would each strategy provide?
(4 marks)
2 x 1 marks for naming each market research strategy. 2 x 1 marks for explaining the types of
information each strategy would provide.
Examples: Surveys and interviews will help to determine their requirements and preferences of
potential customers, such as what they are looking from a child care centre, what facilities they
expect to be provided, and how much they are prepared to pay. Norkids could have used this
information in planning their business. The Norkids owners could refer to Australian Bureau of
Statistics demographic data, such as Census statistics, to help them identify a suitable location for
the business. This information could have helped them to locate the business in an area where
there are many young working families.
Question 5
a. Explain what a key performance indicator is. Discuss how key performance indicators are
used by business. (2 marks)
1 mark for a definition of key performance indicator (KPI). 1 mark for explaining how they are used.
A KPI is a criterion or measure used to evaluate business performance in terms of its effectiveness
and efficiency. Businesses use KPIs to measure effectiveness in achieving stated goals and
efficiency in the use of resources.
b. Explain and justify an appropriate key performance indicator to measure each of the
following aspects of the performance of a business. (2 + 2 = 4 marks)
i. financial performance
Financial performance can be assessed using measures such as profit (what is left after costs
are deducted) or revenue (gross income).
ii. levels of environmental responsibility
Levels of environmental responsibility can be assessed using measures such as amount of
waste produced, the number of violations of environment protection laws, levels of greenhouse
gas emissions, and energy and water use.
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Question 6
Outline four types of decisions that the owners of this new business would have made during
the 12 months leading up to the business opening and four types of decisions they would
have made during the first 12 months of the business operating. (8 marks)
4 x 1 marks for each type of decision in the 12 months prior to commencing the business. 4 x 1 mark
for each type of decision made during the first 12 months of operation.
Types of decisions made in the 12 months prior to commencing the business include:
Are we suited to running a small business?
What type of business should we open?
Is the business idea viable?
Should we start a business from scratch, buy an existing business or purchase a franchise?
What form of ownership structure should we adopt?
Where should we locate the business?
How should we design the layout of the business?
What is required in writing up an effective business plan?
What are the legal compliance requirements of setting up the business?
What licences and permits do we need to obtain?
What insurance should we take out?
What are the human and physical resource requirements of the business?
What will be the operating hours?
Types of business decisions made in the first 12 months of operation include:
Do we need to extend or change the hours of operation?
Do we need to recruit more staff to meet the needs of the business?
How should we market the business? Do we need to change the marketing strategies?
Should we invest more capital into the business?
Do the staff need additional training?
How should we evaluate the performance of the business?
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