Question 1: Business Canvas Project

Second Stitch: testing a price

Units 1, 2 and 3
10 points
About 25 minutes

You can use a calculator on this question, just like on exam day.

Questions about the business project you built during the course: you pitch your product, explain how you tested a hypothesis to make a decision, and explain whether a common challenge for entrepreneurs, such as getting outside funding, threatens your idea. Practice questions here use a made-up sample project. On the exam: Question 1 of 4 (official name: Business Canvas Project Exam-Day Validation), Section IIA: 25 minutes, 15% of the score. Covers Units 1–4 and Skill Categories 1, 2 and 4. Section II has 4 free-response questions in 90 minutes (40% of the score). The exam is fully digital in Bluebook, and only a 4-function calculator is allowed (handheld or the built-in Desmos 4-function calculator).

The question and its sources

This is a practice version of Question 1. On the real exam, you answer about the Business Canvas Project you built during the course. Here, answer about the sample project below, which a made-up student built.

Sample Business Canvas Project: Second Stitch

Student entrepreneur: Amara, a high school junior.

Product: Second Stitch sells tote bags sewn from secondhand denim jeans. Each bag is one of a kind, with the jeans' original pockets on the outside. Amara sells them at a weekend craft market.

Target customer profile: students ages 16–24 who try to shop secondhand or eco-friendly, and who want accessories that look unique rather than mass-produced.

Customer want (validated in Unit 1): In a survey of 90 students at a school sustainability fair, 62% said they try to buy secondhand or eco-friendly products, and 48% said the reusable bags sold in stores all look the same.

Per-unit cost: about $8 a bag (thrifted jeans, thread, lining and a label).

Pricing hypothesis: Customers will pay $30 for a Second Stitch tote because each bag is one of a kind.

Test: On one weekend Amara priced every tote at $30; on the next weekend she priced the same styles at $22. She counted visitors to her booth and bags sold, and asked each buyer, 'What made you buy this bag?' Results are in Table 1. At both prices, most buyers said the bag being one of a kind was the main reason.

Decision: Amara set the price at $30.

Startup costs: a sewing machine ($180), a city vendor permit ($50), materials for her first 20 bags (20 × $8 = $160) and her first month of booth fees (4 weekends × $40 = $160), for a total of $550. Amara has $400 saved from a summer job.

Source: Hypothetical sample project written for this practice question

Table 1. Results of Amara's two-weekend price test

Weekend	Price	Booth visitors	Bags sold	Revenue	Profit over materials
Weekend 1	$30	140	9	$270	$198
Weekend 2	$22	150	12	$264	$168

Source: Hypothetical data written for this practice question

Suggested time: 25 minutes

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Part (A)

3 points

Pitch Second Stitch. Cover four things: what the product is; who the target customer is; the problem, need or want it's meant to address; and why customers would find it valuable.

Your answer to part (A)

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Part (B)

1 point

Businesses typically formulate and test hypotheses related to pricing strategies. Describe one reason a business would use a value-based pricing strategy.

Your answer to part (B)

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Part (C)

4 points

Explain how Amara tested a hypothesis about her pricing strategy. Cover four things: the hypothesis; the research method Amara used; the evidence that came back; and how that evidence changed Amara's decisions.

Your answer to part (C)

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Part (D(i))

1 point

Paying startup costs may be a problem for entrepreneurs with a new idea. Describe one way entrepreneurs often pay startup costs before seeking outside financial capital.

Your answer to part (D(i))

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Part (D(ii))

1 point

Explain why paying startup costs does or does not represent a challenge to the viability of Second Stitch. Your response should include evidence from the canvas that supports your explanation.

Your answer to part (D(ii))

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