Drake has a law degree and works for a partnership of lawyers during the day. Drake owns a website that gives free legal advice. He works on the website in the evenings and at the weekend. He started the website as a hobby, but the website has grown to over 20000 users and he now sells advertising on his videos and on the website. Drake uses outsourcing for some areas of his website. He has recently been sent a report showing variances in the budget from the previous month (see Table 2.1). Table 2.1 Budget report for Drake's website in the previous month | | Budget | Actual | |---|---|---| | Total revenue | $4500 | $4000 | | Total costs | $600 | $750 | | Profit | $3900 | $3250 | Drake has now left his job and is focusing full time on the website. He rebranded the website as Law Advice Forum (LAF). Drake's business plan for LAF included: • Operating as a sole trader. • Continuing to develop and expand the website to provide legal advice and paid legal services. • Renting an office in city G where all employees would work. • Hiring five fully qualified lawyers. • Hiring three administrators. • Leasing IT equipment. However, Drake is concerned about the limitations LAF will face as a labour intensive operation.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2025). The mark or mark type is shown in brackets.

1. [1] (a)(i) Responses may include:
2. [1] Knowledge of an external stakeholder of a partnership
3. [1] • Customers / consumers
4. [1] • Suppliers
5. [1] • Competitors
6. [1] • Government
7. [1] • Local community
8. [1] • Potential investors/owners
9. [1] • Banks
10. [1] Do not accept owners, investors or shareholders, as these are internal stakeholders.
11. [1] Accept all valid responses.
12. [3] (a)(ii) A01 Knowledge and understanding
13. [1] Knowledge of one relevant point is used to answer the question.
14. [3] AO2 Application
15. [2] Developed application of one relevant point to a business context.
16. [1] Limited application of one relevant point to a business context.
17. [0] No creditable response.
18. [3] Responses may include:
19. [1] AO1 Knowledge and understanding
20. [1] Knowledge of outsourcing (max 1 mark), including:
21. [1] • Using another business (a third party) to undertake a business function
22. [1] • Using an external business/producer to undertake a business function
23. [3] AO2 Application
24. [3] Limited application applies knowledge of outsourcing to a business context
25. [3] Developed application applies knowledge of outsourcing to a business context
26. [3] • Examples of an outsourcing function; manufacturing, accounting and finance, HRM etc.
27. [3] • Allow explanations of reasons for outsourcing; lack of skills, cost advantage, increasing capacity etc.
28. [3] • Not using the business's own resources; employees, machines etc.
29. [3] Accept all valid responses.
30. [3] (b)(i) Formula:
31. [1] Actual - Budget = Variance (1) OR Budget – Actual (1)
32. [3] Calculation:
33. [1] Variance = $3250 – $3900 = $650 (1)
34. [1] Adverse (1) - only award if this is evidenced by the working/answer
35. [3] Ans = $650 adverse (3 marks)
36. [3] Accept 16.67% (must include % sign and be correctly rounded, i.e. 17%, 16.7% etc.) adverse as a correct answer
37. [3] (b)(ii) A01 Knowledge and understanding
38. [1] Knowledge of one relevant point is used to answer the question.
39. [3] AO2 Application
40. [2] Developed application of one relevant point to a business context.
41. [1] Limited application of one relevant point to a business context.
42. [0] No creditable response.
43. [3] Responses may include:
44. [1] A01 Knowledge and understanding
45. [1] Identification of a way to use budget data (max 1 mark), including:
46. [1] • measuring performance
47. [1] • allocating resources
48. [1] • controlling
49. [1] • monitoring a business
50. [1] • decision making (or examples of decision making, e.g. pricing, costing)
51. [1] • planning.
52. [3] AO2 Application
53. [3] Explanation of a way to use budget dat (max 1 mark), including:
54. [3] • measuring performance; by comparing actual data with budgeted data
55. [3] • allocating resources; by allocating more budget to priorities
56. [3] • controlling; by allocating less budget to low priority functions
57. [3] • monitoring a business; to see areas of a business with greater variances.
58. [3] Context applied to Drake/LAF (max 1 mark), including:
59. [3] • Drake ran his website in the weekends and evenings
60. [3] • Drake gave free legal advice
61. [3] • LAF still provides free legal advice but paid legal services
62. [3] • Drake was the only internal stakeholder of his website
63. [3] • Drake uses outsourcing
64. [3] • Use of data in Table 2.1
65. [3] • Drake has expanded LAF
66. [3] • Will employ five lawyers
67. [3] • Will employ three administrators
68. [3] • Labour intensive business
69. [3] • Sole trader
70. [3] Accept all valid responses.
71. [8] (c) A01 Knowledge and understanding
72. [2] Knowledge of two relevant points is used to answer the question.
73. [1] Knowledge of one relevant point is used to answer the question.
74. [8] AO2 Application
75. [2] Application of two relevant points to a business context.
76. [1] Application of one relevant point to a business context.
77. [8] AO3 Analysis
78. [4] Developed analysis that identifies connections between causes, impacts and/or consequences of two points.
79. [2] Developed analysis that identifies connections between causes, impacts and/or consequences of one point.
80. [8] Answers must be about the limitations of operating as a labour intensive business, not simply the limitations of managing/having labour.
81. [8] Responses may include:
82. [2] A01 Knowledge and understanding
83. [2] Identification of a limitation of operating as a labour intensive operation, including:
84. [2] • High labour cost
85. [2] • Ongoing costs of labour (wages, salary, health care, training, induction etc.)
86. [2] • Inconsistent quality – human error
87. [2] • Labour relations problems
88. [2] • Potential shortage of skilled employees
89. [2] • Slower production
90. [2] AO2 Application
91. [2] Application of the advantage to LAF including:
92. [2] • Drake ran his website in the weekends and evenings
93. [2] • Drake gave free legal advice
94. [2] • LAF still provides free legal advice but paid legal services
95. [2] • Drake was the only internal stakeholder of his website
96. [2] • Drake uses outsourcing
97. [2] • Use of data in Table 2.1
98. [2] • Drake has expanded LAF
99. [2] • Will employ five lawyers
100. [2] • Will employ three administrators
101. [2] • Developed a business plan
102. [2] • All employees would work in the same office in city G
103. [2] • Employees will need to be able to use IT equipment
104. [2] • Sole trader
105. [4] AO3 Analysis
106. [4] Limited analysis of a limitation of operating as a labour intensive business – developed analys including:
107. [4] • High labour cost: increasing the pressure on the business to increase revenue so that it does not make a loss.
108. [4] • Ongoing costs of labour (wages, salary, health care etc.); which may make the business unprofitable – leading to bankruptcy.
109. [4] • Inconsistent quality: leading to customer dissatisfaction and being sued in court – increasing business costs.
110. [4] • Labour relations problems: workers may not get on together leading to high labour turnover – which may increase the business costs of recruitment and training and reduce profit / lead to loss.
111. [4] • Potential shortage of skilled employees; so, the business is unable to meet demand and loses sales – reduced profitability.
112. [4] Accept all valid responses.
113. [12] (d) Level A01 Knowledge and understanding 2 marks
114. [2] Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question.
115. [1] Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question.
116. [0] No creditable response.
117. [12] AO2 Application 2 marks
118. [2] Developed application of relevant point(s) to the business context.
119. [1] Limited application of relevant point(s) to the business context.
120. [0] No creditable response.
121. [12] AO3 Analysis 2 marks
122. [2] Developed analysis that identifies connections between causes, impacts and/or consequences.
123. [1] Limited analysis that identifies connections between causes, impacts and/or consequences.
124. [0] No creditable response.
125. [12] AO4 Evaluation 6 marks
126. [5-6] Developed evaluation in context
127. [5-6] • A developed judgement/conclusion is made in the business context.
128. [5-6] • Developed evaluative comments which balance some key arguments in the business context.
129. [3-4] Developed evaluation
130. [3-4] • A developed judgement/conclusion is made.
131. [3-4] • Developed evaluative comments which balance some key arguments.
132. [1-2] Limited evaluation
133. [1-2] • A judgement/conclusion is made with limited supporting comment/evidence.
134. [1-2] • An attempt is made to balance the arguments.
135. [0] No creditable response.
136. [12] Responsibility is the duty or state of being accountable for something, meaning Drake has the obligation to take care of it or to ensure this is done.
137. [12] Do not reward characteristics/qualities of an entrepreneur – it must be something that an owner/manager is responsible for in a business.
138. [12] Responses may include:
139. [2] A01 Knowledge and understanding
140. [2] Knowledge of owner responsibilities (max 2 marks), including:
141. [2] • To create a business plan
142. [2] • To develop aims, objectives, strategy and tactics
143. [2] • To keep track of finances and accounting
144. [2] • To manage marketing and sales
145. [2] • To make sure the business is operating legally and compliantly
146. [2] • Ensure excellent customer service
147. [2] • To employ and co-ordinate human resources
148. [2] • Manage day-to-day operations
149. [2] • Plan new initiatives
150. [2] • To train the employees
151. [2] • To facilitate operations
152. [2] • To oversee purchasing
153. [2] AO2 Application
154. [2] Application to Drake/LAF including:
155. [2] • Drake ran his website in the weekends and evenings
156. [2] • Drake gave free legal advice
157. [2] • LAF still provides free legal advice but paid legal services
158. [2] • Drake was the only internal stakeholder of his website
159. [2] • Drake uses outsourcing
160. [2] • Use of data in Table 2.1
161. [2] • Drake has expanded LAF
162. [2] • Will employ five lawyers
163. [2] • Will employ three administrators
164. [2] • Labour intensive business
165. [2] • Developed a business plan
166. [2] • All employees would work in the same office in city G
167. [2] • Employees will need to be able to use IT equipment
168. [2] • Sole trader.
169. [2] AO3 Analysis
170. [2] Limited analysis of owner responsibilities – developed analys, including:
171. [2] • To create a business plan; to give the business direction so that it can operate efficiently – reduce costs / increase revenue.
172. [2] • To develop aims, objectives, strategy and tactics – to give the business direction so that it can operate efficiently – reduce costs / increase revenue.
173. [2] • To keep track of finances and accounting; so that the business does not go into debt – and go bankrupt.
174. [2] • To manage marketing and sales; so that the business can gain revenue – to increase profit.
175. [2] • To make sure the business is operating legally and compliantly; so that the business is not sued – which could increase the costs.
176. [2] • Ensure excellent customer service; so that customers return – increasing revenue.
177. [2] • To employ and co-ordinate human resources; so that the business can operate efficiently – reducing costs and increasing profitability.
178. [2] • Manage day-to-day operations; to enable to business to meet its customers' needs – increasing revenue and repeat purchases.
179. [2] • Plan new initiatives; to expand the business – increasing revenue.
180. [2] • To train the employees; to increase customer satisfaction – increasing profit.
181. [2] • To facilitate operations; to enable revenue to be created – increasing profitability.
182. [2] • To oversee purchasing; to enable efficient operations – reducing average costs and increasing profitability.
183. [6] AO4 Evaluation
184. [6] Limited evaluation of the most important owner responsibility – developed developed in context, including:
185. [6] • A judgement of the most important responsibility of Drake as the owner of LAF.
186. [6] • What the judgement may depend upon; Drake's own objectives/skills, the likely success of LAF as it expands, the finances available to Drake etc.
187. [6] • It is unknown what the legal structure of LAF is as a shareholder, Drake would have different responsibilities than a sole trader.
188. [6] • Whether Drake is able to expand LAF as he plans to – his responsibilities as a 'one-person' business are different than his responsibilities as LAF grows and employs more people.
189. [6] • The type of legal advice that Drake may be providing and the laws pertaining to legal advice in the countries where LAF operates.
190. [6] • A judgement about the importance of one responsibility or a weighing up of the comparative importance of more than one responsibility.
191. [6] Accept all valid responses.