Business structure — Paper 2 — A Level Business (for first examination in 2016) 9609 topical questions

Question 1

Gourmet Ices (GI) GI is a partnership owned by Tom and Amy Smith. The business makes and sells high- quality ice cream. At present the ice …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘partnership’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: A correct definition must distinguish between a partnership and any other form of business ownership. Content A business formed by two or more people with shared responsibilities and shared capital investment. Unlimited liability, no continuity. Often partnerships will have a partnership agreement to separate out investment and responsibilities. Exemplar Mark Rationale A partnership has two or more owners 2 A correct definition with unlimited liability. An unincorporated business with more 2 A correct definition than one owner. A business formed by two or more 1 This could be people with shared responsibilities confused with a and shared capital investment private limited company An unincorporated business with 1 This could be unlimited liability and no continuity. confused with a sole trader 1(a)(ii) Briefly explain the term ‘crowd funding’ (line 16). 3 Award one mark for each point of explanation: C Example of some other way of showing good 1 mark understanding, i.e. rewards, returns etc. B Each contributing a (relatively small) amount or from 1 mark each individual A Large number of people 1 mark Note: No credit for stating that crowd funding is a source of finance, as this is stated in the data. Content Crowd funding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. Typically made up of the business who is looking for funding, the people who may wish to fund the business and an intermediary organisation/agent who link the two together. There are different types of crowd funding, such as debt crowd funding and equity crowd funding where the rewards may be advance products or services, visits to the factor, interest or shares/equity in the business. 1(b)(i) Refer to Table 1. Calculate the break-even level of production with 3 CAM. Mark Rationale 3 marks Correct calculation of break-even level of production with CAM (with or without working) 2 marks Attempt with correct use of figures 1 mark Correct formula 0 marks No creditable content Content FC Formula: or TR=TC (1) Contribution (1) Contribution = $2.50 – $1.00 = $1.50 (1) 15 000 = 10 000 (1) 1.50 Answer = 10 000 (3) Correct answer with no working should be awarded 3 marks. OFR 1(b)(ii) Explain one benefit to GI of using break-even analysis 3 Level Knowledge and Application Marks 2b Explanation of a benefit of using break-even 3 (APP analysis in context +APP) 2a Identification of a benefit of using break-even 2 (APP) analysis in context 1 (K) Shows understanding of the use of break-even 1 analysis 0 No creditable content 0 Correct use of an incorrect answer to 1(b)(i) should be fully rewarded (own figure rule – OFR) No credit for knowledge of BE or formula – already awarded in previous question. Content Answers may include: • decisions over how many to make/sell • to plan production • to monitor costs • to model pricing options • to target/forecast a profit level • to target/forecast a margin of safety. Context may include: • BE is higher with CAM • probably due to extra machinery • however output is significantly higher • as is the profit margin • batch production • expansion throughout country • quality ice cream – not about quantity. 1(c) Analyse two possible disadvantages to GI of introducing CAM to 8 produce ice cream. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Good analysis of two (or more) disadvantages of 4 4 introducing/using CAM in Shows context understanding 2 of CAM in Good analysis of one context disadvantage of 3 3 introducing/using CAM in context Limited analysis of two (or more) disadvantages of 2 Shows introducing/using CAM 1 knowledge of 1–2 Limited analysis of one CAM disadvantage of 1 introducing/using CAM 0 No creditable content A non-contextual answer can only be awarded a maximum of 2 + 2 = 4 Content Answers could include: • Possible loss of quality in the production of the ice cream – could lead to poor customer satisfaction (GI makes and sells high quality ice cream). • Possible loss of perceived quality as the business loses it's 'handmade' badge. • Cost of introducing the technology ($10 000 extra FC costs per month). • Damage to the relationship with the five skilled workers. • Loss of skills (GI employs five skilled workers). • Reliability of the machinery (GI do not have the money to repair it – as seen in their need to raise $50 000 form venture capitalists). • Need for training/retraining as the employees are already trained in handmaking ice-cream. ARA 1(d) Recommend which of the two venture capital offers Tom and Amy 11 should accept. Justify your answer. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) A justified recommendation, for Tom and Amy, which venture 7 capital offer they should accept based on a balanced argument. A recommendation, for Tom and Amy, which venture capital offer they 6 should accept based on a balanced argument. A balanced argument based on one or both 5 venture capital offers with evaluative comments Shows understanding 3–4 Two sided argument(s) of one or both venture based on one or both 4 capital offers venture capital offers One sided argument based on one venture 3 capital offer Shows knowledge of Limited analysis of venture 1–2 1–2 venture capital capital Justification can come from looking at the advantages and/or disadvantages of BOTH offers, or from the advantages and disadvantages of the recommended offer. Answers could include: Offer 1 • Loss of control – 51% equity given away – are Tom and Amy willing to give up so much? • Ease of distribution – should allow easier national expansion • Marketing knowledge and expertise – again should allow easier expansion Offer 2 • Lower equity stake required – Tom and Amy would keep overall control of the business • Use of CAM will reduce costs of expansion – may further lower BE point and increase profit margin • Experience of Rebecca in project management and ops man – very important for expansion. ARA

Question 2

Magical Mirrors (MM) MM manufactures a range of mirrors using flow production. MM benefits from economies of scale. Ben and Mary, the owner…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘economies of scale (lines 1–2). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition will contain: • decreasing unit/average costs • as output rises Exemplar Marks Rationale As a firm produces more the average A correct definition 2 cost falls Unit costs decrease due to an Partial 1 increase in size More output leads to a fall in costs No link to decreasing 1 average/unit costs The savings a firm gets as it grows Partial idea of increase 1 bigger in output Lower costs because the firm is No creditable content 0 established 1(a)(ii) Briefly explain the term ‘buffer inventory’ (line 6). 3 Example or some other way of showing good understanding, i.e. risky to hold too much/too little, C 1 Mark link to liquidity, types of inventory (raw materials, in progress and finished) etc. An explanation of buffer, i.e. surplus, lowest amount B 1 mark etc. An explanation of inventory, i.e. stock, supplies to A 1 mark produce, etc. This is when a business keeps surplus inventory in event of a problem with supply or an increase in demand for its products. This helps prevent the business from running out of supplies which could slow down or prevent production. Ties up working capital. Can be risky if buffer levels too high. No need to link to liquidity or risk of high levels of inventory. Exemplar Marks Rationale Raw materials that are kept in event of Understanding of a problem with supply or an increase buffer and inventory in demand for its products. For and an example. 3 example MM might have a buffer stock of mirrors in case they have an increase in customers. Stock that can be used in case there Understanding of is a sudden increase in customers. buffer and inventory The business will not want too much 3 and good buffer inventory because it ties up understanding shown. money. Surplus stock to make sure the An understanding of business does not run out 2 both inventory and buffer. The inventory a form will keep to make Tautology with sure it does not run out. 1 ‘inventory’ but an idea of buffer. 1(b)(i) Refer to Table 1, Calculate MM’s acid-test ratio. 3 Marks Rationale Correct calculation of MM’s acid-test ratio (with or without 3 working) 2 Correct formula and correct calculation of CL 1 Correct formula or correct calculation of CL 0 No creditable content CA - Inventory CL 15–10 = 5+5 5 = 10 = 0.5:1 (accept 0.5, 50% and any ratio that is equivalent, i.e. 1:2) Common incorrect answers Answer Marks Rationale 15 Correct calculation of ratio based on an =1.5 2 incorrect formula (OFR) – only one 10 mistake 15 Incorrect formula and incorrect calculation = 3 1 of CL, but figures used correctly (OFR) – 5 two mistakes 1.5 0 An incorrect answer with no working 3 0 An incorrect answer with no working 1(b)(ii) Explain one way in which MM could improve its liquidity. 3 Level Knowledge and Application Marks 2b (APP) Explanation of a way to improve liquidity in context 3 1b (KK) Identification of a way to improve liquidity 2 1a (K) Knowledge of liquidity 1 0 No creditable content 0 Correct use of an incorrect answer to 1(b)(i) should be fully rewarded (own figure rule – OFR) No credit for knowledge of acid test or formula – already awarded in previous question Use of acid test ratio (0.5) and/or current ratio (1.5) may provide context if used correctly within a way to improve liquidity. Context and content is likely to come from: Way to improve liquidity (K) Possible context (APP) Increase cash (e.g. by holding MM holds $10 m of inventory – high less inventory, fixed assets buffer inventories etc.) MM is a manufacturer so probably has machines etc. to manufacture mirrors Has an overdraft so will need more than $5 m to have positive cash Increase current assets (e.g. Trade receivables (debtors) is $5 m increase trade MM is a manufacturer (secondary) so receivables/debtors) may gain other benefits from increasing debtor turnover/period Decrease current liabilities Trade payables is $5 m, same as trade (e.g. decrease trade payables, receivables – could be better to have overdraft, short term loans etc.) lower payables than receivables Long lead time may make reducing payables difficult Could reduce overdraft through same ways as increasing cash. Convert $5 m overdraft into longer term debt. 1(c) Analyse one advantage and one disadvantage to Ben and Mary of 8 changing MM from a partnership to a private limited company. Knowledge and Level Marks Analysis (4 marks) Marks Application (4 marks) Shows good Good analysis of one understanding of (or more) advantage(s) moving from a AND one (or more) partnership to a private 4 disadvantage(s) of 4 limited company changing from a partnership to a private limited company 2 Shows isolated Good analysis of one understanding of (or more) advantage(s) moving from a OR one (or more) partnership to a private 3 disadvantage(s) of 3 limited company changing from a partnership to a private limited company Shows knowledge of Limited analysis of one partnerships AND (or more) advantage(s) private limited AND one (or more) 2 2 companies disadvantage(s) of a private limited company 1 Shows knowledge of Limited analysis of one partnerships OR (or more) advantage(s) private limited OR one (or more) 1 1 companies disadvantage(s) of a private limited company Contextual: Possible advantages Possible context Gain limited liability Ben and Mary were in a partnership before and so had higher risk should MM fail that they would lose not only their investment but would be personally liable for the debts of MM Ben and Mary doubled their investment Gain continuity In case Ben or Mary die Gain separate legal identity In case the business gets sued Possible disadvantages Loss of control Ben and Mary have owned and run the business for such a long time (however they are the only shareholders so unlikely to be an issue) Cost of conversion Unlikely to be high but MM has poor liquidity – was this the cause? Preparation and availability Cost – link to liquidity of accounts Competitors will be able to access the accounts 1(d) Discuss how MM could solve its human resource problems. 11 Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based 7 on argument(s) in context Developed evaluation based on argument(s) in 6 context An evaluative statement based on arguments in 5 context Argument about one or 3–4 more solutions to human 3–4 resource problems at MM Limited analysis of human 1–2 1–2 resource management No creditable content (0 marks) Context/content: • Training and development, survey shows this was rated poor by 25% of all employees. This is high. Therefore MM should ensure that employees have appropriate training to develop their skills and improve their morale. This may also help with opportunities for promotion. • Team working – morale is lower for employees involved in the production process and this may link to the flow production methods. Therefore team work may improve this as employees can work together and improve their sense of involvement • Fringe benefits and perks – although MM pay well, they could look at their perks and fringe benefits such as holiday periods as this may be a reason • Empowerment and participation – doing some focus groups with employees and/or creating worker representatives may enable MM to better understand the issues and therefore resolve them. Evaluation is likely to come from a candidate: Judging which methods could work best for MM and justifying this in the context for example, training and development given the survey outcomes Weighting their response, for example, why one method would be better than another is likely to lead an evaluative response. Problem Possible solutions Example of analysis Increase wages – link to Already high. Increased costs retention Use non-monetary motivation Could increase costs – may be an Increasing labour (e.g. holidays, perks, fringe alternative to higher wages. turnover benefits etc.) Increase training/skills Increased costs – could be wasted if development staff leave Better/more advertising Increased costs – what is the cause of the fall? Demographics, word of mouth etc. Decreasing Increase wages Already high. Increased costs applications Increase training/skills Could improve word of mouth – may development attract younger applicants, but increased costs Reduce wages Decrease motivation and increase labour turnover further Change payment system (i.e. May not increase costs (could fall) and High management piece rate, retention bonus may increase retention, but may and labour costs etc.) demotivate some workers Increase capital/reduce labour Needs investment - already using flow production – could reduce quality, may further reduce motivation Improve hygiene factors Are conditions poor? If so can it be Low motivation – (poorer in production) improved without increasing costs? lower in production workers Teamwork/cell production May conflict with flow production Increase training/skill Increased costs but could improve development quality and retention Poor skills Increase capital/reduce labour Needs investment – already using flow development production – could reduce quality, may further reduce motivation Increase training/skill Increased costs but could improve development quality and retention Poorly trained/skilled Increase capital/reduce labour Needs investment – already using flow workers production – could reduce quality, may further reduce motivation

Question 3

Quality Leather (QL) QL is a worker co-operative. It is equally owned by ten owner-workers and was set up five years ago. QL produces bags,…

Accepted Answer

2(a)(i) Define the term ‘batch production’ (line 3). 2 Knowledge and Application Mark A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 • Separate groups/set amount/limited number – do not accept batch • Go through production process together before moving on to the next Batch production is where quantities of identical goods are produced in small groups. They go through the production process at the same time. Production is then switched over to allow another batch to be produced. Example(s) not required. Exemplar Mark Rationale Batch production is where quantities of identical goods are produced 2 A correct definition together and then move on to the next process A group of products go from one Both elements stage of production to the next 2 covered together When products are made in small 1 Partial definition quantities Confusion with job Products made one a time 0 production Products made continuously and are Confusion with 0 all the same flow/mass production 2(a)(ii) Briefly explain the term ‘co-operative’ (line 1). 3 Award one mark for each point of explanation: Example or some other way of showing good understanding, i.e. bulk buying, common in agriculture, C 1 mark motivational, slow decision making, development of a point used in B etc. • Responsibilities are shared • Owners may contribute to the running of the business B 1 mark • Shared decision making • All members have one vote • Profits are shared A • Owned/financed by workers/customers/members 1 mark A co-operative is a business structure where the workers are the owners. The profits are shared with workers. Workers (owner) do not have to run the business, they will vote for Directors. In smaller co-operatives such as worker co-operatives then workers may also run the business. Exemplar Mark Rationale Members (A) own a co-operative and share the running (B) of the business. QL is a worker co-operative which 3 A, B and C mean the workers are the members (C). A co-operative can be owned by customers or workers (A) who will each have a vote (B). Because they 3 A, B and C own it, they are motivated for it to do well (C). A co-operative has shared profit (A) 2 A and B and responsibilities (B) Members (A) who join together to 2 A and C benefit from bulk buying (C) A co-operative is made up of people Three points but all who share the responsibilities of the 1 from B, so only one business (B). Each person has a vote mark. and the decision making is shared. 2(b)(i) Refer to Table 1. Calculate the gross profit margin for 2016. 3 Mark Rationale Correct calculation of gross profit margin (with or without 3 working or %) 2 Correct formula and correct calculation* of gross profit 1 Correct formula or correct calculation* of gross profit 0 No creditable content Formula can be implied through the correct use of figures *working required or explicit identification Gross profit × 100 Revenue = 240 – 80 = 160 160 = × 100 = 66.67% (accept 66.7% and 67%) 240 • Allow an answer of 66% or 66.6% or 66.66% as a TWO mark answer with or without working as the candidate has made one mistake in not rounding correctly. • Also allow an answer of 0.67 as a TWO mark answer with or without working as the candidate has made one mistake by not calculating a percentage Allow full marks for a correct answer with or without working or % 67% or 66.7% or 66.67% Common incorrect answers Answer Mark Rationale GP=160 1 Explicit identification of gross profit We have to assume this is an answer to the question and with no working, $160 0 this is incorrect and therefore no marks Correct formula (implied) and correct (explicit) calculation of gross profit but 66% 2 the calculation of the GP margin is incorrect (with or without working) 0.67 2 Allow with or without working 240 – 80 – 20 = 140 Formula mixed up with net profit margin, so wrong formula, but correct 2 140 calculations based on this wrong × 100 = 58.33% formula 240 58.33% 0 A wrong answer with no working 90 Formula is correct (implied) but 2014 × 100 = 60% 2 figures have been used correctly OFR 150 115 Formula is correct (implied) but 2015 × 100 = 63.89% 2 figures have been used correctly OFR 180 2(b)(ii) Explain the importance of profitability to QL. 3 Level Knowledge and Application Mark Explanation an importance of profitability in 2 (APP) 3 context 1b (KK) Explain an importance of profitability 2 1a (K) Identify an importance of profitability 1 0 No creditable content 0 Profitability is the margin between cost per unit and selling price (or the margin between total revenue and total cost). This is in contrast to profit which is the amount (i.e. not margin) made. Candidates do not need to show their knowledge of either profit or profitability. They need to explain an IMPORTANCE of profitability. Context and content is likely to come from: • Profits pay owner/workers income, so profitability is essential • As QL expands into Option A or Option B it will need to maintain profitability Importance (K) Possible context (APP) In QL the gross profitability is improving (60% in 2014, 63.89% in 2015 and The achieve the objectives of 66.67% in 2016 OFR) the business Net profit has also been improving (50% in 2014, 55.56% in 2015 and 58.33% in 2016) QL has made a profit in each of the last To avoid business failure three years To fund business QL needs the profits/profitability to fund growth/expansion the expansion into Option A or Option B Owners are the ten owner-workers who To reward owners make up the co-operative – without pay they are likely to sell the business The owner/workers will derive their To make a profit income form QL To assess business QL could benchmark themselves against performance similar bag producing business 2(c) Analyse one advantage and one disadvantage to the other owner- 8 workers of Iqbal’s leadership style. Level Knowledge and application Analysis Good analysis of one advantage and one disadvantage of 4 democratic leadership Shows understanding of in context 2 democratic leadership in 3–4 Good analysis of one context advantage or one disadvantage of 3 democratic leadership in context Limited analysis of one advantage and one 2 disadvantage of leadership style Shows knowledge of 1 1–2 leadership styles Limited analysis of one advantage or one 1 disadvantage of leadership styles 0 No creditable content Leadership styles outlined in the specification are: Autocratic, democratic, laissez-faire, Theory X and Theory Y (McGregor) Annotate advantages in the left hand margin and disadvantages in the right hand margin Content (K) is likely to come from: Advantages: • More ideas taken into account • Better communication • Improved motivation • Shared objectives/vision • Reduced employee turnover Disadvantages: • Decisions may be discussed but the leader still makes the decisions – could demotivate • Time wasted in discussion • Employees may not have the ‘full picture’ Examples of features of Examples of Examples of possible democratic application/context analysis leadership Better decisions → The other nine revenue to continue to More ideas – owner/workers can add increase → profits for the advantage their ideas owner/workers to continue to increase Lower cost of production More efficient production → less cost of sales → Better motivation of bags, cases and higher gross profit → – advantage wallets more return for the owner workers Increased cost of Wasted time in Less time for production production → higher cost discussion – of bags, cases and of sales → lower gross disadvantage wallets profit → less return for the owner workers Choose wrong option → Other owner/workers Expansion does not Poor decision may not understand the increase value of QL → making data about the two profits for the options for expansion. owner/workers reduce ARA 2(d) Recommend which option QL should choose for expansion. Justify 11 your choice. Knowledge and Analysis and Evaluation Mark Mark Application (4 marks) (7 marks) A justified recommendation for QL on which option it should choose for expansion 7 based on the given argument(s) of Option A and Option B A developed recommendation for QL on which option it should choose for expansion 6 based on the given argument(s) of Option A and Option B An evaluative statement/recommendatio n based on the given 5 argument(s) of Option A and Option B Shows understanding of Argument(s) based on Option A and Option B for 4 Option A and Option B for 4 expansion expansion Shows understanding of Argument(s) based on Option A or Option B for 3 Option A or Option B for 3 expansion expansion Limited analysis of Option A and Option B for 2 expansion Shows knowledge of 1–2 expansion Limited analysis of Option A or Option B for 1 expansion To access evaluation candidates must have shown understanding of Option A and Option B with two pieces of argument (ANAN) Context/content: High priced leather shoes • Larger market value • Branding is important and QL has an established brand • High prices could be charged due to price inelasticity • Competition is high, but brand could overcome this • Cost of new machinery • New distribution channels; do QL have any experience of this – cost? Low priced leather belts • Lower market value • Quality is important and QL have experience in leather market • Could use price competition due to price elastic response • Lower level of competition • Could be made on current machinery if there is capacity • Can use current distribution channels – cheaper option? An example of how an answer could develop and how it should be annotated. ANAN K APP AN EVAL (one sided) Overall QL is more likely to be interested in having a small share of a large Option A would Which is likely to market, so allow QL to lead to a more should choose expand into a successful A bigger market Option A. (EVAL market with a expansion and may lead to more – statement) value of $2m. more profit for sales for QL. This is bigger the (AN) However it than the market owner/workers. depends upon for Option B. (ANAN – Option how high the (APP) A) level of competition is Expansion is and how much when a business QL would need grows, for to spend on the example by marketing to selling a new establish product range.. themselves in the (K) shoe market. (EVAL – Which is likely to developed) lead to a higher However Option Less competition chance of As long as the B only has a is likely to mean success in the potential revenue medium level of that QL will find it Low priced outweighs the competition as easier to leather belt costs of Option A opposed to a establish their market and more then the larger high level for brand in the sales and profit market will allow Option A. (APP) market. (AN) over time. (ANAN much more – Option B) growth than Option B and is therefore the better option. (EVAL – justified)

Question 4

Designer Clothing (DC) DC is a medium sized private limited company. DC has three main shareholders. It has been trading for ten years. DC …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘shareholders’ (line 1). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition must show the difference between a shareholder and an owner / (part) owner of a company, has limited liability etc. A shareholder is the owner/part owner of a company/incorporated business. Can be private or public limited company. A shareholder tends to buy shares and sell when they increase in value. A shareholder will expect dividends from the profits as a return on their investment. A shareholder has voting rights at the AGM and invests in a business/has voting rights. Answer Mark Reason A shareholder is a stakeholder 1 Partial definition A shareholder is an owner of a Could be a sole trader 0 business A shareholder is part-owner of a Refers to part ownership and company company 1 so not a sole trader or partner but only partial A shareholder invests money in a Two correct elements 2 business and receives dividends 1(a)(ii) Briefly explain the term ‘focus group’ (line 22). 3 Award one mark for each point of explanation: Example of some other way of showing good understanding, i.e. 1 mark Accuracy can be affected by bias, Opinions may not be C representative of the general population/target market. Not statistically significant. Can aid decision making B Consumers/potential consumers/target market/customers 1 mark A Primary/qualitative/opinions/feedback/led by interviewer 1 mark This is a method of primary research. Used by businesses to get a group of customers together for feedback on a product or service. Can be expensive. Gives more accurate and qualitative data. Allows dialogue during the research process. Accuracy can be affected by bias. Opinions may not be representative of the general population/target market. Not statistically significant. Interviewer is present to lead discussion. Answer Mark Reason A group of people 0 Too vague A group of customers 1 B mark for customers An interviewer carries out primary 2×A points with ‘interviewer’ and research on a group of customers ‘primary research’ and a B mark for 2 customers. No C element so 2 marks Primary research on potential All 3 – A, B and C elements consumers to help make decisions 3 about a product. 1(b)(i) Refer to Table 1 and other information. Calculate the price of the dress for Lydia. 3 Mark Rationale 3 marks Correct calculation of price (with or without working or $) 2 marks Correct calculation* of total costs (with or without $) 1 mark Correct formula or correct calculation* of wages 0 marks No creditable content (FC+VC) + mark-up = Price Wages = 20 hours × $10 = $200 Total costs = $200 + $250 + $50 = $500 Add 50% = $250 So selling price will be $750 *Working required or explicit identification of TC/wages Common incorrect answers Answer Mark Rationale 10 × 20 = 200 1 Correct calculation of wages $200 + $250 + $50 = $500 2 Total costs calculated with working 500 × 150% 2 Correct calculation, answer missing FC + VC then add mark up 1 Correct formula $500 0 A wrong answer with no working $200 0 A wrong answer with no working Wages=200 1 Explicit identification of wages TC=500 1 Explicit identification of TC 1(b)(ii) Explain one payment method (other than time based) that DC could use to pay its 3 employees. Level Knowledge and Application Marks 2 (APP) Explanation of a payment method other than time based 3 in context 1b (KK) Explanation of a payment method other than time based 2 1a (K) Identification of a payment method other than time based 1 0 No creditable content 0 Context and content is likely to come from: • Piece rates, e.g., employees could be paid per pair of trousers in the new batch production • Salary where dress designers are paid a an annual salary which is paid monthly • Commission for designers per dress (% of the value e.g. of the $750) • Bonuses linked to the profits paid for DC, more sales of designer clothing will lead to bonuses being paid • Similar approach for performance related pay and profit sharing. Context – designers, employees on the batch production method, designer clothing, reputation for quality Identification Explanation Possible context Piece rate Payment based on Quality may be sacrificed and output DC have an excellent reputation for quality Commission Payment based on the Dress designers would be paid value produced commission on $750 price of a dress 1(c) Analyse two human resource problems that DC might experience from the 8 introduction of the new batch production method. Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) Shows understanding Good analysis of two (or of two (or more) 4 more) human resource human resource (ANAN problems that DC might 4 problems in context + experience from the ANAN) introduction of the new batch 2 production method. (APP’s) Shows understanding Good analysis of one human of one human resource problem that DC 3 resource problem in might experience from the 3 (ANAN) context introduction of the new batch production method. Shows knowledge of Limited analysis of two (or two (or more) human 2 (AN + more) human resource 2 resource problems AN) problems 1 (K’s) Shows knowledge of Limited analysis of one human one human resource 1 (AN) resource problem 1 problem 0 No creditable content Contextual analysis likely to come from: • Lower morale/job satisfaction – workers are used to working on unique clothing and will have immense pride in their work. This may fall if working on a batch production line. • Deskilling – if machinery is being used, this may replace the skills of the employees used to make unique clothing • Training needs – the new machinery will involve training, how will Khaleal manage this? • Fear of change/communication issues – employees are likely to be very wary of the new machinery/batch production. Khaleal needs to have a clear communication and employee participation strategy. ARA 1(d) Discuss a suitable pricing strategy that DC could use for the new range of 11 trousers. Knowledge and Marks Analysis and Evaluation (7 marks) Marks Application (4 marks) Justified evaluation based on 7 arguments in context Developed evaluation based on 6 arguments in context An evaluative statement based on 5 arguments in context Shows understanding of Arguments (two sided) based on one one or more pricing 4 or more pricing strategy in context 4 strategy in context Identifies one or more Argument (one sided) based on one 3 3 pricing strategy in context pricing strategy in context Shows understanding of Two or more pieces of limited analysis one or more pricing 2 of one or more pricing strategy 2 strategy Identifies one or more One piece of limited analysis of one 1 1 pricing strategy pricing strategy No creditable content Context must be explicit not just implied but the strategy, i.e. penetration for a new product is not context, but penetration because DC have a new range of trousers is contextual Context/content: • Competitive – the trousers are being sold to department stores. They are likely to have other competitors and so they will need to be competitive to persuade the department stores to stock the trousers. This may be feasible as the department stores will know the prices they are prepared to pay. • Penetration – DC are moving into a new market. They may look to offer high discounts on initial orders, build their relationship with the department stores and then increase prices. Can DC afford this? How will competitors react? • Skimming – unlikely to be effective as these are batch produced products – they may have a reputation for quality but batch production will mean the uniqueness of each piece of clothing will be lost so unlikely to be able to charge higher prices especially to a department store. • Price discrimination – unlikely to be effective as difficult for DC to separate the market for trousers particularly by geography. They are selling direct to the department stores who will then decide which stores to sell them in. DC does not have control of this. They are also trying to break into a new market so unlikely this will work.

Question 5

Car Wash (CW) CW is a national chain of car wash businesses. Each car wash is a franchise of CW and is owned and managed by an entrepreneur…

Accepted Answer

2(a)(i) Define the term ‘franchise’. (line 1) 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition will contain: What the franchisee gains (i.e. use of name/logo/trading system/operations system etc«) What the franchisor gains (i.e. royalties/license fee/percentage of profits/sales etc...) Exemplar Marks Rationale A business that pays a licence fee/royalties to use the logo and 2 Correct definition trading systems of an existing business Partial definition but A business that uses the logo and 1 no sense of a trading systems of another business payment/licensing A business that uses the name of 1 Partial definition another business 2(a)(ii) Briefly explain the term ‘entrepreneur’ (line 2). 3 Award one mark for each point of explanation: Example of a quality, i.e. qualities required by an C entrepreneur; innovation, self-motivation, creativity, 1 mark multi- skilled, leadership, confidence. Makes the decisions/runs/manages/leads a business B 1 mark venture/owns/starts a business A Takes the risk 1 mark Content Someone who takes the financial risk of starting and managing a new venture. Qualities may include innovation, self-motivation, multi-skilled, leadership, confidence, risk taking. . Exemplar Marks Rationale An entrepreneur takes the risk of starting a business and makes the 3 All three elements decisions, An entrepreneur should be confident Someone who makes decisions about the factors of production, takes risks 3 All three elements and comes up with creative ideas. Someone who takes the financial risk of starting and managing a new 2 A and B only venture. Someone who takes the risks in a 1 A only business Running a business 1 B only 2(b)(i) Refer to Table 1 and any other relevant information. Calculate the 3 forecast closing balance at the end of Month 2. Marks Rationale 3 Correct answer (with or without working or $) Correct calculation of net cashflow for both months (can be 2 one calculation or two) Formula or one correct calculation of net cashflow; i.e. cash 1 inflow-cash outflow (can be month 1 or month 2) 0 No creditable content Formula: Opening balance + net cash flow (Cash inflow – cash outflow) Calculations: Opening balance $10 000 Cash inflow $40 000 Cash outflow $35 000 Closing balance $15 000 (3 marks for correct answer) Common incorrect answers Answer Marks Rationale M1 $20 000 – $25 000 = –$5000 (1) M2 $20 000 – $10 000 = $10 000 Missed off opening 2 (1) balance Answer = $5000 No idea where the $5000 (no working) 0 figure came from so no marks Some understanding with opening balance 10 000 + 20 000 – 10 000 1 but cash inflow and = 20 000 outflow for month 2 only No opening balance 20 000 – 10 000 and cash inflow and 1 = 10 000 outflow for month 2 only 10 000 0 No working Correct formula 1 Correct formula 2(b)(ii) Explain one benefit for Palesh of producing a cash flow forecast. 4 Level Knowledge and Application Marks 2b Explanation of one benefit of cash flow 3 (APPAPP) forecasting used in context Identification of one benefit of cash flow 2a (APP) 2 forecasting in context Identification of one benefit of cash flow 1a (K) 1 forecasting 0 No creditable content 0 Correct use of an incorrect answer to 1bi should be fully rewarded (own figure rule – OFR) Content Answers could include: • Palesh can show the cash flow forecast to CW to help get the franchise • One of the major causes of new business failure is poor cash flow. A cash flow forecast will help Palesh to foresee any potential problems such as not having enough cash to pay wages • Allows Palesh to see when he may need extra finance • May help Palesh to get external finance if required Note: a positive cashflow does not mean profit will be made – do not reward this confusion in an answer. 2(c) Analyse one advantage and one disadvantage to Palesh of how he 8 carried out his market research. Knowledge and Level Application Marks Analysis (4 marks) Marks (4 marks) Good analysis of one (or more) advantage(s) AND one (or more) 4 disadvantage(s) of market research Shows techniques in understanding of context 2 market research 3–4 Good analysis of one techniques in (or more) context advantage(s) OR one (or more) 3 disadvantage(s) of market research techniques in context Limited analysis of one (or more) advantage(s) AND one (or more) 2 disadvantage(s) of market research Shows knowledge techniques of market 1 1–2 research Limited analysis of techniques one (or more) advantage(s) OR one (or more) 1 disadvantage(s) of market research techniques Limited analysis in context: Marks limited to 4+2=6 Answers could include: Advantages • Quick – reduces costs to Palesh • This is primary research which can be more up-to-date than secondary • Cheaper than other methods that may require more preparation time • Focused on the local area where Palesh is planning to set up his business 2(c) Disadvantages • Choose random – surely Palesh is only interested in people who have cars • On high street – is this the best place to sample people who might want to use a car wash? • Limited questions – e.g. could have asked what time of day might use the car wash 2(d) Recommend how Palesh could motivate his employees. 11 Knowledge and Analysis and Evaluation Application Marks Marks (7 marks) (4 marks) A justified recommendation for for Palesh based on the given argument(s) of one or 7 more motivation methods in context A developed recommendation for Palesh based on the given 6 argument(s) of one or more motivation methods in context An evaluative statement/ recommendation based on the given argument(s) of 5 one or more motivation methods in context Argument (two-sided) based on one or more motivation 4 Shows knowledge of methods in context motivation methods 3–4 Argument (one-sided) based in context on one or more motivation 3 methods in context Shows knowledge of Limited analysis of one or motivation/motivation 1–2 1–2 more motivation methods methods No creditable content 2(d) Content: Answers could include: • Payment methods are unlikely to be in context as Palesh has already stated he must pay a low wage. Commission/bonus or piece rate could be viable options as both of these keep costs linked to revenue. Alternatively, fringe benefits (such as free car washing) could be an option. • Job rotation – there may be some way of moving employees around the different jobs to stop them becoming demotivated • Job enlargement – there may be some additional responsibilities (such as a supervisor role) that Palesh could utilise • Job enrichment – unlikely to be much scope, but it may be possible to allow employees to decide on certain aspects of their role • Team working • Quality circles • Target setting – This may work as a motivational tool as long as there are enough cars to maintain the targets (could be linked to bonus or profit sharing scheme) • Delegation • Empowerment • Participation – Allowing workers to participate in decisions about the business may be a useful form of motivation, especially in a new business 2(d) An example of how an answer could develop and how it should be annotated. ANAN K APP AN EVAL (one sided) If Palesh uses a However, not all workers are method such as motivated by the same methods allowing so Palesh might need to use CW is labour workers to Less absenteeism more than one non-financial intensive so participate in would mean higher method of motivation. (EVAL – it is important decision making productivity and statement) that Palesh they will feel they would be able finds ways to part of the to wash more cars. As car washing can be boring motivate business and (ANAN) some workers might be Motivation staff. (APP) work harder to motivated by more interesting methods make it a work such as extra are used to success. (AN) responsibilities maybe as inspire staff supervisors or by changing roles to work during a shift so not always harder. (K) being the person who cleans ANAN (two-sided) inside cars (EVAL – developed) Motivation Working conditionsmethods However, if Palesh was to ask mean thatcould be The best some to take on extra This will mean employees workfinancial methods responsibilities he might have to that they are outside and theyand non- would be offer higher pay and this might less likely to will get wet whichfinancial. non-financial not be possible as it would raise take could make them(K) as Palesh costs so Palesh might have to unnecessary feel miserable and wants to consider less costly motivation days off work. more likely to take keep costs methods such as team working (AN) days off or leave low. (APP) where the team can decide how the job which could they will complete the necessary result in a bad tasks. This would fit in with reputation for CW. Palesh’s cost concerns. (EVAL – (ANAN) justified)

Question 6

Nearly New (NN) NN sells second-hand computers. NN is owned by Nathan who is a sole trader. Nathan is a fully trained and qualified compute…

Accepted Answer

2 Nearly New (NN) 2(a)(i) Define the term ‘inventory’. 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 A correct definition will cover two of the following bullets: • Stock • Raw materials, work in progress, finished products • Used in, or the result of the production process/operations – to fulfil future demand, to sell • Current asset Note: Inventory is a syllabus term to mean the stock of a business – a definition of inventory in terms of all the assets owned by a business (i.e. to take an inventory) is not rewardable. 2(a)(ii) Briefly explain the term ‘sole trader’. 3 C One mark for each of the following (up to a maximum of two 1–2 marks): marks B • Unincorporated • Unlimited liability • No continuity • No separate legal identity • Income tax must be paid (not corporation tax) • Owns all of the profit/responsible for all the losses/takes all the risk • Shares cannot be sold • Accounts do not need to be produced/published/made available A One individual or one person (must be a clear idea of a single 1 mark person) Note: the B and C marks are dependent on gaining the A mark Exemplar Marks Rationale Owned by one person who has 3 A, B and C unlimited liability and takes of the profit for themselves. A single owner with no shareholders 3 A, B and C and accounts do not need to be published. A sole trader has unlimited liability 3 It does not matter if the A and no continuity. It is owned by one mark comes after the B and person. C marks Owned by one person with no 2 A and B shareholders A sole trader does not have any 0 No A mark – this could just shareholders as easily apply to a partnership. A business that has unlimited liability 0 No A mark – this could just with no shareholders and no as easily apply to a continuity. partnership. The person responsible for finance, 0 No understanding of one decision making etc« owner – this could be a manager 2(b)(i) Calculate the total profit that Nathan would make if he sold the whole batch 3 of repaired laptop computers. Mark Rationale 3 marks Correct calculation of the total profit (no $ required) with or without correct working 2 marks Correct calculation of total costs or correct calculation of total revenue (with working) 1 mark Correct formula or correct calculation of total variable costs (with working) 0 marks No creditable content Note: allow an answer of 1500 even if the candidate has identified it as a different figure in the answer (i.e. Total Cost = 1500 = 3 marks) Formula: Total revenue – total costs = profit Calculations: Total variable costs = 20 × £50 repair = $1000 Total costs = Purchase cost = $2000 20 × £50 repair = $1000 $3000 50% mark up = $1500 $4500 Profit = $1500 2(b)(i) Common answers Answer Marks Rationale 1500 (no working) 3 Allow the answer with or without working and $ or incorrect working $2000 + $1000 = $3000 2 Working to support that this is the total cost figure 3000 (no working) 0 A wrong answer with no working to know where the answer has come from 20 × $50 = $1000 1 Working to support the calculation of variable costs $2000 0 A wrong answer with no working to know where the answer has come from 50% of $2000 = $1000 2 One error – mark up was calculated on 20 × $50 = $1000 FC not TC OFR So profit = $0 $2000 2 A route to find total revenue but no 20 = $100 (FC per profit figure – any valid route to find TR computer) correctly without a correct calculation of profit should be awarded 2 marks as $100 + $50 (VC) = $150 long as there is working. (total cost per computer) 50% of $150 = $75 (mark up per computer) $150 + $75 = $225 (price per computer) $225 × 20 = $4500 (total selling revenue) $4500 (no working) 0 A wrong answer with no working to know where the answer has come from 2(b)(ii) Explain one advantage to Nathan of using a cost based pricing strategy. 3 Level Knowledge and Application Marks 2 (APPAPP) Explanation of an advantage of using cost 3 based pricing in context 2 (APP) Identification of an advantage of using cost 2 based pricing in context 1 (K) Identification of an advantage of using cost 1 based pricing 0 No creditable content 0 Answers could include: Examples of Examples of context Possible explanations identifications of an (APP) (APPAPP) advantage (K) Quick and simple Nathan is a computer Therefore this will save engineer and may not Nathan time. be experienced in running a business. Nathan needs to focus So Nathan can focus on on repairing computers gaining sales for the not complicated pricing business. methods. Always leads to a profit Each computer has a So any price higher total cost of $150. than this will result in a Always covers the full profit for Nathan. cost of each computer Predictable profit Nathan chose a 50% So the mark-up should margin mark-up. always equal the profit margin. So Nathan can target a certain margin that he will find acceptable. 2(c) Analyse two methods Nathan could use to improve NN’s cash flow. 8 Level Knowledge and Analysis application 2 Shows 4 Good analysis of TWO 4 understanding of methods of improving cash TWO methods of flow in context improving cash flow in context Shows 3 Good analysis of ONE 3 understanding of method of improving cash ONE method of flow in context improving cash flow in context 1 Shows knowledge of 2 Limited analysis of TWO 2 TWO methods of methods of improving cash improving cash flow flow Shows knowledge of 1 Limited analysis of ONE 1 cash flow or ONE method of improving cash method of improving flow cashflow 0 No creditable content One factor analysed in context, max 3 + 3 Note: the focus of the analysis must be on improving cashflow Answers could include: • Could use a cashflow forecast to identify when Nathan needs extra cash • Nathan could take a partner (this is contextual) • Could arrange credit facilities with suppliers– would the large electrical retailers offer him any credit? • If Nathan currently offers credit (unlikely) he could make sure his customers pay on delivery or in advance. • Nathan could take out a short term source of finance for times when he needs extra cash to purchase inventory – cost of finance, likelihood of getting finance • Take out a long term source of finance to give Nathan access to cash when he needs it – opportunity cost of using finance, cost of finance • Keep a low amount of cash tied up in inventory – unlikely to be popular as customers want next day delivery and a range of computers 2(c) Examples of Examples of application/context Examples of possible methods analysis Arrange Nathan is purchasing from large More time to pay Æ sell credit with electrical retailers who may be computers before paying suppliers likely to give him credit. for the stock Æ revenue before costs need to be Nathan is an established paid Æ less chance of customer of the large electrical negative cashflow businesses and therefore more likely to get credit. Nathan needs the time this credit would give him to repair the computers. Short term Nathan is an established Allow purchase without source of business and may get credit. needing cash Æ Will not finance worsen Nathans Nathan is a sole trader and may cashflow position Æ Less struggle to get a short term chance of negative source of finance cashflow A short term source of finance would allow Nathan to purchase Increase costs of NN Æ the computers without needing a Increase price of a ‘buffer’ of cash available – he can computer Æ May reduce add in the cost of finance to the sales Æ may reduce price of the computers (i.e. costs profits plus). 2(d) Recommend which one of the two potential employees Nathan should select. 11 Justify your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) A justified recommendation for 7 Nathan on which potential employee he should select based on the given arguments for selecting Katy and Sahdat A developed recommendation for 6 Nathan on which potential employee he should select based on the given arguments for selecting Katy and Sahdat An evaluative 5 statement/recommendation based on the given arguments for selecting Katy and Sahdat Shows understanding of 4 Argument(s) based on selecting 4 selection criteria for Katy Katy and Sahdat as potential and Sahdat employees for NN Shows understanding of 3 Argument(s) based on selecting 3 selection criteria for Katy Katy or Sahdat as potential or Sahdat employees for NN Shows knowledge of 1–2 Limited analysis of Katy and 2 selection Sahdat as potential employees Limited analysis of Katy or 1 Sahdat as potential employees Note: APP, AN and ANAN about Katy should be placed in left hand margin and Sahdat in right hand margin Katy • Lower previous salary • Some experience of dealing with electrical retailers (NNs suppliers) • Degree – but is this necessary? • Younger – but is this a benefit and should Nathan make a decision based on age (legal issues?) • Relevant skills and organisation could be useful Sahdat • Higher previous salary – does this mean that he will expect more? • More experience in relevant area • No qualifications, but are they necessary? • Older, but could this be a benefit? • Will his skills of managing employees and communication be any use within NN where he will be the only employee and possibly not customer facing? 2(d) An example of how an answer could develop and how it should be annotated. K APP AN ANAN (one EVAL sided) Selection is Katy has got This may This is likely to I would the ability to some help Nathan reduce the recommend that choose experience to negotiate costs for Nathan chooses between working for a better prices Nathan of doing Sahdat because potential large and credit business, better employees electrical with his improve his productivity will for a retailer. suppliers cashflow and help Nathan to position. (K) (APP) who are the increase his sell computers large chances of quicker and this A business electrical making a profit. may help solve can select retailers. (ANAN – Katy) his major employees (AN) problem of through cashflow. (EVAL interviews, – statement) experience, skills etc. However it However More Quicker repairs (K) depends upon Sahdat has experience could increase whether Nathan more may lead to the productivity feels he can experience quicker of NN and manage Sahdat. than Katy in repairs. (AN) mean that he (EVAL – repairing can sell more developed) computers computers, but he has quicker and If he can’t then been his own gain more this productivity boss for the profit. (ANAN – boost is unlikely last 10 years. However he Sahdat) to happen and (APP) may not be Katy might be willing to the better option take If Sahdat as she may be instructions cannot take easier to from Nathan orders then manage. (EVAL about what Nathan may – justified) to do. (AN) find him difficult to manage and this may lead to conflict and lower productivity for NN. (ANAN – Sahdat) Note: only two ANANs are needed (one for Katy and one for Sahdat) to enable evaluation many candidates will attempt more analysis to give depth to their evaluation. Make sure you are only awarding analysis to the appropriate level – if a candidate has tried to cover lots of different points but only got to limited analysis (AN) each time, then this does not build an argument. Please look out for quality of analysis rather than quantity.

Question 7

Paul’s Clothes (PC) PC is a sole trader business that is owned and managed by Paul. Paul financed the business using a mortgage on his home…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘unique selling point’ (line 6). 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 A correct definition should cover the following aspects. • Differentiates • Features • A unique selling point is something that makes a product stand out from its competitors, such as a phone with a new feature that no other phones have. • It is a feature that none of the other businesses have and means the product can be sold for a higher price. 1(a)(ii) Briefly explain the term ‘business objective’ (line 5). 3 Award one mark for each point of explanation: Rationale Marks Example or some other way of showing good C 1 understanding A feature of business objectives, e.g. specific, measurable, achievable, realistic, time-based, based on B market research, resourced, short-term, long-term, can 1 change over time/in response to factors, set by management, SMART etc. Something a business is trying to achieve, direction, A 1 aim, target, goal etc. Note: A, B and C marks are independent of each other Exemplar: This is a specific target that a business aims to achieve. Examples include survival, profit and entering new markets. 1(b)(i) Refer to Table 1. Calculate the value of X. 2 Rationale Marks Correct calculation of the value of X (no $ or 000s required) 2 with or without correct working Correct formula or correct calculation of cash out (with 1 working) No creditable content 0 Formula: Opening Balance + cash in-cash out = closing balance Cash out = $5000 (allow 5) -1 + X – 5 = closing balance of 1 -1 + 7 – 5 = closing balance of 1 X = 7 Answer = 7 ($7000) Common answers Answer Rationale Marks 7 (no working) Correct answer 2 2 + 2 + 1 = 5 Correct calculation of cash out 1 Without working there is no way to know 5 (no working) 0 where this figure came from 1(b)(ii) Explain two methods that PC could use to improve its cash flow. 4 Level Knowledge and Application Marks Explanation of two methods of improving 2 (APP+APP) 4 cash flow in context Explanation of one method of improving 2 (APP) 3 cash flow in context Identification of two methods of improving 1b (K+K) 2 cash flow Identification of one method of improving 1a (K) 1 cash flow 0 No creditable content 0 Cash flow could be improved by: • Decreasing cash out (without decreasing cash in) • Increasing cash in (without increasing cash out) Context and content is likely to come from: Method Context • Declining in forecast Revenue • Focus on market segment suitable for country with rising unemployment New computerised • $10 000 – could use a different source of inventory system finance (i.e. not cash) • Reduce number of workers in one/both stores • Reduce wages (seems to be happening in Employee costs month 6 anyway – can this be done earlier) • Unemployment in country is rising, so may be able to reduce wages. • Revenue is forecast to fall significantly but Purchases purchases do not fall by same proportion – can these be reduced? • Will reduction in the marketing budget mean sales reduce further? Marketing • High spending on marketing budget (50% of revenue in Month 6) – is this necessary? Sources of finance • To cover short term issue in Month 5 1(c) Analyse one advantage and one disadvantage to PC of purchasing the 8 computerised inventory management system. Knowledge Level and Marks Analysis Marks application Good analysis of one advantage and one 4 disadvantage of purchasing 4 Shows an inventory management understanding system in context 2 of inventory Good analysis of one management in advantage or one context 3 disadvantage of purchasing 3 an inventory management system in context Limited analysis of one advantage and one 2 disadvantage of purchasing 2 an inventory management Shows system knowledge of 1 inventory Limited analysis of one management advantage or one 1 disadvantage of purchasing 1 an inventory management system 0 No creditable content Inventory management is the control of stock – this could be raw materials, work in progress of finished products. Contextual analysis likely to come from: Advantages: • PC is in fashion business so being able to respond to customer need important e.g., not running out of sizes or style of clothes • Will allow PC to identify sales patterns quickly and respond to demand, boost revenue and cash in, possibly improve cash flow Disadvantages: • Economy slowing down so making sure not over ordering is important so not left with clothes/footwear that does not sell • Initial outlay expensive and economy slowing down, is this the best time to be investing in a stock control system? • Training for Paul on using the new system – will he have time as a sole trader running two shops? Can he afford it? 1(d) Evaluate Paul’s decision to set up PC as a sole trader. 11 Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based on 7 argument(s) in context Developed evaluation based 6 on argument(s) in context An evaluative statement based on argument(s) in 5 context Shows understanding Argument about Paul’s of setting up as a sole 3–4 decision to set up PC as a 3–4 trader in context sole trader Shows knowledge of Limited analysis of being a 1–2 1–2 being a sole trader sole trader No creditable content 0 Note: A candidate may evaluate the decision in terms of setting up as a sole trader or in terms of not setting up as another legal structure (or both). • Paul gets to make his own decisions –he has been through survival and now focusing on maximising profits/sales. Gets to decide what he wants to do with the business e.g., opened up the second shop, investing in the new stock control system • Paul keeps the profits to himself and he has been pleased with the level of profit made. Rewards for his investment/entrepreneurial skills. • Unlimited liability = higher risk especially if economy slowing down and considering Paul’s market, cash flow slowing down and so if the business fails Paul is liable. • Unlimited liability – heightened risk as Paul financed PC with mortgage on his home • Loss of income for Paul as revenue expected to slow for at least the next 6 months. This will affect his livelihood and his standard of living. • More susceptible to competition/changes in the economy.

Question 8

Luxury Carpets (LC) LC is a large public limited company operating in country B. LC produces and sells a range of luxury carpets and other …

Accepted Answer

2(a)(i) Define the term ‘productivity’ (line 20). 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 A correct definition should cover both of the following aspects of productivity: • A measure/ratio of the efficiency of inputs (e.g. labour, capital, time etc.) • Of a business/machine/capital/labour/outputs. • Could give formula for calculating labour or machine productivity. A correct formula would cover both aspects. 2(a)(ii) Briefly explain the term ‘public limited company’ (line 1). 3 Rationale Marks Example or some other way of showing good understanding, such as: • Limited liability • Continuity • Separate legal identity C 1 • Corporation tax must be paid (not income tax • Accounts need to be published • Run by a Board of Directors • Dividends may be paid • Legal formalities (i.e. Articles, Memorandum etc.) B Sold on the stock exchange/to general public 1 A Owned by shareholders/sells shares 1 Note: C mark cannot be awarded until both A and B marks have been awarded 2(b)(i) Refer to Table 2. Calculate the value of the growth in revenue earned 4 by LC from the hotel market segment over the last four years. Rationale Marks Correct answer (no $ required) with or without correct working 4 Good attempt at calculation 3 Reasonable attempt at calculation 2 Some attempt at calculation 1 No creditable content 0 (A) Correctly calculate revenue from hotel sector ($20m) – 1 mark (B) Attempt at calculating revenue four years ago – 1 mark (C) OFR correct attempt at calculating 25% of revenue – 1 mark Revenue is currently $50 000 000 hotel 40% so now segment is $20 000 000 It has increased by 25% in 4 years so 4 years ago total revenue was $50 000 000 × 100/125 = $40 000 000, hotels 40% so $16 000 000 Was $16 000 000 now $20 000 000, answer is $4 000 000 2(b)(ii) Explain one way LC could use the information in its income statement. 2 Level Knowledge and Application Marks 2 (APP) Explanation of one way LC could use the 2 information in context 1 Identification of one way LC could use the 1 (K) information 0 No creditable content 0 Note: The income statement already includes calculations of gross profit, operating profit, profit for the year etc. Answers may include: Use Possible context To calculate • Of different market segments (households, profitability (profit hotel, offices, restaurants) margins) • Impact of increase in revenue over last 4 years (increase of 25%) Analyse changes • Between segments • After introduction of new machine To see trends • In segments • In costs of manufacturing the carpets To compare • Over past four years whilst revenue has increased • Between segments • With other carpet manufacturing firms To measure • Revenue increase by 25% performance • Shareholder value • Of different segments To see if objectives • PLC so could link to shareholder objectives have been reached 2(c) Analyse two benefits to LC of increasing worker participation. 8 Knowledge and Level Marks Analysis Marks application Good analysis of two benefits of increasing Shows 4 worker participation in understanding of context 2 worker 3–4 participation in Good analysis of one context benefit of increasing worker 3 participation in context Limited analysis of two benefits of increasing 2 Shows worker participation knowledge of 1 1–2 worker Limited analysis of one participation benefit of increasing worker 1 participation 0 No creditable content Context: • 500 workers – case says they are unhappy about their pay and working conditions • Poor communication and feel directors do not care about them So, benefits: • Improved communication between directors and workers • Could help improve productivity alongside the capital productivity from the machinery • Could help avoid any labour turnover issues • Could help avoid any quality concerns if employees are demotivated and not feeling cared for • May help alleviate concerns with pay if workers can see conditions improving or directors are starting to listen to and respond to worker concerns. 2(d) Discuss the importance of market segmentation to LC. 11 Knowledge and Analysis and Evaluation Application Marks Marks (7 marks) (4 marks) A justified judgement of the importance of market 7 segmentation to LC based on the given arguments A developed judgement of the importance of market 6 segmentation to LC based on the given arguments An evaluative statement/judgement of the importance of market 5 segmentation to LC based on the given arguments Shows understanding of market Argument based on the use of 3–4 3–4 segmentation in market segmentation in context context Shows knowledge of Limited analysis of market 1–2 1–2 market segmentation segmentation No creditable content 0 Contextual analysis likely to come from: Why market segmentation may be important: • matching of customer needs especially given proportions of sales to business markets, need to understand what hotels want that could be different from restaurants/office for example. • Enhanced profits/revenues for business, revenue has increased by 25% over the last four years, likely as LC knows it customers and their needs well • Better opportunities for growth/more customers, each segment will be different so if more hotels opening and so on then LC can ‘tap into this’ and therefore could be reason why revenue has increased. • Target marketing communications so that LC can have the right message for the right segments e.g. in marketing to restaurants or offices. Why market segmentation may not be important: • Segmentation increases costs. LC makes carpets, this will increase the costs such as research and product development for the carpets and business customers will need different sales techniques • Larger inventory has to be maintained by LC to cover the segments • Promotion and distribution costs increase as LC will need different marketing campaigns for the different segments, for example, TV advertising for the showrooms and personal selling for the business markets.

Question 9

Veg Cans (VC) VC is a public limited company which produces canned vegetables. VC is supplied with fresh vegetables by 20 farms. VC process…

Accepted Answer

2(a)(i) Define the term ‘retained earnings’ (line 15). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A correct definition will include: • An idea that money has been kept by a business • An idea that it is profit Exemplar Rationale Marks The money remaining in the business Both elements 2 after it subtracts its expenses No idea of profit/earnings The money kept by a business 1 element Idea of keeping within the Earnings set aside for a later day 1 business (earnings taut) The profit made by the business An idea of profit 1 The money that the business owner To vague 0 saved 2(a)(ii) Briefly explain the term ‘public limited company’ (line 1) 3 Award one mark for each point of explanation: Knowledge Marks C Example or some other way of showing good 1 understanding e.g. Published accounts, LL, etc. B To the general public/through stock exchange/ 1 A Has shareholders/can sell shares 1 Content A public limited company has shareholders who can purchase shares through the stock exchange. It also has limited liability, continuity and a separate legal identify. Exemplar Rationale Marks Owned by shareholders with limited 3 liability and bought through the stock All points met exchange A PLC is a large company that sells 2 A and B shares to the public. Has shareholders and has limited 2 A and C liability Is owned by the government, has A and C, ignore the 2 shareholders and had limited liability incorrect govt. reference Has shareholders A only 1 Owned by the government Wrong 0 Is a large company Too vague 0 2(b)(i) Calculate VC’s working capital. 2 Rationale Marks Correct answer with or without working 2 Correct use of figures/formula 1 No creditable content 0 Content Current assets – current liabilities $5m – $4m = $1m Common answers Answer Rationale Marks $1m (with or without $) Correct answer 2 $5m – $4m = $1m Correct answer 2 5 – 4 = 1 No need for $ or M 2 $5m – $4m = $6m Correct use but wrong answer 1 Current assets – current liabilities Correct formula 1 $5m + $4m = $6M Incorrect use of figures 0 4/5 × 100 = 0.1 Incorrect formula 0 $4m – $5M = –$1M Incorrect formula 0 2(b)(ii) Explain two ways in which VC could improve its working capital. 4 Level Knowledge and Application Marks 2b (APP + Explanation of two ways to improve working capital in 4 APP) context 2a (APP) Explanation of one way to improve working capital in 3 context 1b (KK) Identification of two ways to improve working capital 1 1a (K) Identification of one way to improve working capital 1 0 No creditable content 0 Content Has to refer specifically to a current asset or a current liability (less than 12 months) Increase current assets: • Increase cash/money – retain more profit, sell fixed assets, sell shares, negotiate discounts, find cheaper suppliers etc. • Increase debtors – only if they are new sales that would not have been cash sales • Increase inventory – again only if this does not have a detrimental effect on cash at the same time Decrease current liabilities: • Replace short term debt (overdraft and creditors for example) with long term debt – will not improve WC if it is paying debt off with cash Possible context (APP) • Reduction of Current liabilities from $4m • Increase in Current assets from $5m • Increase their stock of veg/cans • Decrease their trade receivables (debtors) from customers/food retailers • Increase their trade payables (creditors) from suppliers of veg/cans 2(c) Analyse two methods of selection VC could use when choosing a new manager for 8 the factory. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding of Developed analysis of how VC could use two or 2b 4 two method of selection 4 more methods of in context selection Shows understanding of Developed analysis of 2a how VC could use one 3 one method of selection 3 method of selection in context Shows knowledge of two Limited analysis of two 1b or more methods of 2 or more methods of 2 selection selection Shows knowledge of one Limited analysis of one 1a 1 1 method of selection method of selection 0 No creditable content 0 Content • CV/application forms – look for experience in the industry, advantages and disadvantaged of using CVs. All on paper. Does not bring the candidate to life and show motivation or finance skills • Interviews – ask questions that shows knowledge and how the applicant would deal with situations e.g., employee relations • Tests – e.g., role play could be used as part of the selection process. This would have good advantages for VC – can see who has the best inventory management and finance skills • Trial period (probation) before formalizing any job offer. Advantages and disadvantages of this. ARA Examples of Examples of Examples of possible analysis methods application/context Minimises the number of CV/application Identify relevant experience applicants to be interviewed to forms of inventory management those who identify skills Allows for the selection of Ask questions relating to Interviews managers who can explain employee management problems or situations Work based tests of Can select manager with the best Tests inventory management and demonstrable skills which finance skills reduces mistakes Ensures that the manager isn’t Trial period Trial as factory manager exaggerating the truth and can do his job 2(d) Evaluate the usefulness of the product life cycle to VC when making marketing 11 decisions. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) A justified evaluation based on a developed argument of one or 7 more uses of the Product Life Cycle in context A developed evaluation based on a developed argument of one or 6 more uses of the Product Life Cycle in context A basic evaluation based on a developed argument of one or 5 more uses of the Product Life Cycle in context Shows knowledge of the Developed argument of two or product life cycle AND 4 more uses of the product life cycle 4 marketing decisions in in context context Shows knowledge of the product life cycle OR Developed argument of one use of 3 3 marketing decisions in the product life cycle in context context Shows knowledge of the Limited analysis of two or more product life cycle AND 2 2 uses of the product life cycle marketing decisions Shows knowledge of the Limited analysis of one use of the product life cycle OR 1 1 product life cycle marketing decisions No creditable content 0 Note: Full marks can be gained from only ONE use of the product life cycle; two DEV’s must still be awarded (pros and cons) 2(d) Content 11 • Can identify the varieties which may require extension strategies (i.e. develop product) • Can identify varieties which should be discontinued (in in decline) • Can identify where promotional spending should be – i.e. on varieties in growth stage • Can help to know which pricing strategies to use • Can help to know which distribution channels to use • Can help to introduce the new frozen veg into the market • Can help to manage a large portfolio of varieties/products An example of how an answer could develop and how it should be annotated. K APP AN ANAN EVAL Could The product lifecycle is identify Which could Which could very important for VC canned then be influence (Basic vegetables reformulated promotional recommendation) in their or rebranded activities Product mature/ to extend and because it means they lifecycle is decline their life spending can manage their the stages phase product lines and from birth/ maximise revenue invention (Developed Which could to death/ Can recommendation) Which may minimise decline manage a result in a the product large however it depends on reduction in range and portfolio of the quality of the product reduce canned information gathered duplication inventory products (Justified costs recommendation)

Question 10

Online Travel (OT) OT is a private limited company in country X that sells international holidays on the internet. All of OT’s current rang…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘private limited company’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: A correct definition must distinguish a private limited company from any other legal structure on the syllabus, i.e. PLC, sole trader, partnership etc. Content A business where shares can be sold, but not to the general public. The owners benefit from limited liability. Accounts must be produced but not necessarily published. ARA Exemplar Rationale Marks A private limited company has Could only be a private shareholders but does not sell on 2 limited company the stock exchange Whilst this could be an It has limited liability and but LLP that structure is not 2 cannot sell shares to the public on the syllabus True but this could also A business which cannot sell be a sole trader or 1 shares to the public partnership True but this could also It has limited liability 1 be a PLC True but this could also Sells shares 1 be a PLC A business that is not owned by All true but could still be the government but can sell 1 a PLC shares A business that is owned by This is true but does not private individuals not the distinguish between any 0 government of the legal structures A tautology – just uses A company that is privately words form the question 0 owned so no understanding 1(a)(ii) Briefly explain the term ‘contract of employment’ (line 4). 3 Award one mark for each point of explanation: Knowledge Marks Example of the content of a contract or some other way C of showing good understanding e.g. a sense of 3 security, protection, example of contents Understanding that is between employer/business and B 2 employee Understanding of legal document/agreement or sets out A 1 terms and conditions of employment An agreement between an employee and employer Examples of content: • the business details • the employee’s details • job title or a description of work • start date • how much and how often an employee will get paid • hours of work • holiday entitlement (and if that includes public holidays) • where an employee will be working 1(a)(ii) ARA Exemplar Rationale Marks An agreement between a worker and an employer that shows the All three elements 3 details of their job An understanding of what the All three elements – employer must do and what the ‘must do’ covers 3 employee must do content just Employee signs a contract with an A and B 2 organisation It shows what an employee and A and B only 2 employer have agreed to at work A document stating terms and conditions between HR manager A mark only 1 and employee A mark only – must have an idea of An agreement about an employee 1 employee and employer for B mark States what a worker must do in C mark only 1 their job A contract of employment will Lots of C marks – include the details of the job, the can only be gained 1 employees hours of work, pay rate, once holidays etc.. 1(b)(i) Refer to Fig 1. Identify the age group with the highest average income. 1 Answer = 40+ (1) (allow ‘oldest group’) Do not accept 40 (no plus) 1(b)(ii) Refer to Fig 1. Calculate the percentage of the whole sample which would 2 prefer skiing holidays. Rationale Marks Correct answer with or without working or % 2 Correct calculation of number of people who prefer skiing 1 holidays (100) AND total number of respondents (300) No creditable content 0 Content 100 × 100 = 33.33% (2) 300 Allow 1 mark for incorrect rounding supported by working (ie 100/300 × 100 = 34) 1(b)(iii) Explain one possible disadvantage to OT of using secondary market research. Level Knowledge and Application Marks Explanation of a disadvantage to OT of using 2b (APP) 3 secondary market research Explanation of a disadvantage of using secondary 2a (K+K) 2 market research Identification of a disadvantage of secondary 1 (K) 1 market research 0 No creditable content 0 Note: only mark the best disadvantage written by the candidate is there is more than one. Content • Not specific to the needs of OT in finding a new market segment • Can be ‘old’ – no date on the research – does it reflect recent changes in the holiday market? • No idea of the quality of the original researcher – is it biased? • Cost – OT may have had to pay for the research • Were the respondents the type of consumer to use the internet? ARA Possible disadvantage (K) Possible context (APP) OT need to identify a new market segment and this data is not specific to this Not specific to the needs of the business Is the data based on OT’s market of people who book holidays on the internet? May not reflect the holiday market as it is now Can be out of date Demand is falling No knowledge of the quality May not give OT good data upon which to base of the research their decision of a new market segment 1(c) Analyse the effect on two stakeholders, other than employees, of the 8 decision to make 20% of employees redundant. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding of Developed analysis of the effect of the the effect of the 2b 4 4 redundancies on two redundancies on two stakeholders of OT stakeholders of OT Shows understanding of Developed analysis of the effect of the the effect of the 2a 3 3 redundancies on one redundancies on one stakeholder of OT stakeholder of OT Shows knowledge of Limited analysis of the 1b redundancy and 2 effect of redundancies on 2 stakeholders two stakeholders Shows knowledge of Limited analysis of the 1a redundancy or 1 effect of redundancies on 1 stakeholders one stakeholder No creditable content 0 Note: The business (OT) is NOT a stakeholder Content: Customers – worse service leading to a poor experience using OT Owners – may have less profit as there are high redundancy costs. May eventually have higher profits as the business is more efficient. Managers – may have less workers to supervise Banks/lenders – may worry about the future of OT and not lend for any future ventures Local community – increased unemployment, lower average income Government – increased unemployment, lower income tax revenue. Competitors – OT may lose sales so the competitors may gain sales, competitors may gain new trained employees 1(c) ARA Examples of Example of Examples of Examples of possible effects on stakeholders application/context analysis stakeholder Because the Which means they are website may be frustrated because they Unable to down due the cannot use the website Customers book a redundancies and have to search for a holiday amongst the holiday elsewhere taking technical specialists extra time. Leading to a lower Dividends (OT is a income for the Ltd) may decrease Owners Less profit shareholders and a because of the extra chance that they will redundancy costs want to sell their shares Question Answer Marks 1(d) Recommend how OT can use the internet in the marketing mix for holidays 11 aimed at the new target market. Justify your recommendation. Knowledge and Analysis and Evaluation Application Marks Marks (7 marks) (4 marks) A justified recommendation based 7 on a developed argument A developed recommendation 6 based on a developed argument A basic recommendation/judgement based 5 on a developed argument Shows Developed argument based on the understanding of the use of the internet in one or more internet in one or 3–4 3–4 elements of the marketing mix for more elements of the OT marketing mix for OT Shows knowledge of Limited analysis of the use of the 1–2 1–2 the marketing mix internet in the marketing mix No creditable content 0 Note: Candidates can gain all the marks from use of one element of the marketing mix Content • Promotion – many ways in which the internet could be used, especially in this target market. Social media, viral marketing etc.. Allow use of specific platforms, such as Facebook, Twitter, Snapchat etc.. Relatively cheap methods of promotion, can show elements of the holiday (ie skiing) in videos etc.., good for targeting this age group and accessible on various devices. • Price – use of dynamic pricing to change prices based on demand, timing etc. Easy to adapt prices and change in short period of time. • Product – Could be tied into the product, so offer free WIFi with holidays, online catalogues and search facilities showing the product portfolio. • Place – can be sold through the internet, reduces labour costs, more likely to be suitable for this target market. 1(d) Candidates can also use the 4C’s: • Cost to the customer • Convenience to the customer • Customer solution • Communication with the customer To award APP a candidate requires all three elements: • Marketing mix (the knowledge to back it up) • The target market (16–30) • Internet ARA

Question 11

Swimming Pools (SP) SP is a public sector organisation. SP operates many swimming pools across country X. The main objective for SP is to p…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘market segment’ (line 3). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content • Part of a market • Made up of groups of customers who share similar characteristics, interests, etc. Exemplar Marks Rationale Sub-group of a whole market (1)for Identifies that it is part of a consumers with similar 2 market aimed at specific characteristics such as age(1) customers Again Identifies that it is part of a market but no A group or portion of a whole market 1 reference to target group of customers It is the whole market 0 Incorrect definition 1(a)(ii) Briefly explain the term ‘public sector organisation’ (line 1). 3 Award one mark for each point of explanation: Knowledge Marks Example or some other way of showing good understanding C e.g. Product that might not be adequately provided by the 1 private sector/profit not an objective. To provide a service to the local community/ social B 1 objectives A Owned/controlled by the state/government 1 Note: Must have an answer from section A or B Content A business owned and controlled by the government to provide services and products that might not be adequately provided by the private sector. Exemplar Marks Rationale Owned and controlled by the state All 3 elements included – A + (1) to provide a social benefit (1) 3 B + C profit not an objective (1) Owned by the government (1) e.g. 2 Only 2 elements A + C fire service (1) Not run with the aim of making a profit (1) but aim to a service to 2 Only 2 elements B + C the community (1) State owned enterprise (1) 1 Only 1 element A Too vague – private sector Organization funded by the 0 organizations may be funded government by the government 1(b)(i) Calculate the gross profit margin (%) for The Lido. 3 Rationale Marks Correct answer with or without correct working 3 Identifies correct data 2 Formulae* 1 No creditable content 0 *Could be implicit from the figures Content (GP / Revenue) × 100 (70 / 280) × 100 = 25% accept 25 Exemplar Marks Rationale 25% 3 Correct answer (70 / 280) × 100 3 Correct numerical answer = $25 (70 / 280) × 100 Not converted to a % but correct formula and 2 = 2500 data Correct formula but cost of sales used instead of (70 / 210) × 100 2 TR. OFR rule applies so 1 mark for correct = 33.3% formula and 1 mark for (OFR) answer 1 mark for formula but used profit rather than GP. OFR does not apply here, as the answer (30 / 280) × 100 1 should have a decimal point after 10 i.e. = 1007140 10.07140. If the decimal point in the correct position then 2 marks 1(b)(ii) Explain how one stakeholder of SP might be affected by the Lido making 3 a loss. Level Knowledge and Application Marks 2b (APP Explanation of an effect on a stakeholder in context 3 + APP) 2a (APP) Identification of an effect on a stakeholder in context 2 1 (K) Identification of an effect on a stakeholder 1 0 No creditable content 0 Content: • Government/owners: more government spending needed – opportunity cost of spending • Customers: prices may increase, may have to travel to further swimming pool • Local community: poor service, travel to other pools • Workers: may be made redundant, lower wages Reference to owners not having dividends, etc. are unlikely to be in context. Closure is not an impact unless it is taken through to show how the stakeholder would be impacted, i.e. The Lido may close leading to an increase in the funds available for the government to spend. ARA 1(c) Analyse one advantage and one disadvantage to SP of using price 8 discrimination. Knowledge tation marks) tation Level Applicationand Marks Anno- Analysis (4 Anno- Marks (4 marks) Good analysis of Shows one advantage understanding APP+ and one DEV+ 2b of price 4 4 APP disadvantage to DEV discrimination SP of using price in context discrimination Good analysis of Shows one advantage or understanding one disadvantage 2a of pricing 3 APP 3 DEV to SP of using methods in price context discrimination Limited analysis of Shows one advantage knowledge of and one AN+ 1b 2 K+K 2 price disadvantage of AN discrimination using price discrimination Limited analysis of Shows one advantage or knowledge of 1a 1 K one disadvantage 1 AN pricing of using price methods discrimination No creditable 0 content Content Advantages: • Increase number of customers – particularly important for a publically owned business • Gives access to the swimming pool to more people, not dependent on income • Can be used to increase demand during off peak times • Can be used to decrease demand at peak times. Disadvantages: • Reduce income – may be contributing to the loss made by The Lido • May be seen as a poor quality service • May be seen as unfair against people who pay full price • May lead to excess demand at off peak times and low demand at peak time 1(d) Recommend whether SP should close The Lido. Justify your answer. 11 Knowledge and Analysis and Anno- Anno- Application Evaluation tation tation Marks Marks (4 marks) (7 marks) A justified recommend- ation based on 7 a developed two sided argument A developed recommend- ation based on 6 a developed two sided argument A basic recommend- ation based on 5 EVAL a developed two sided argument Developed argument based APP + on closure of 4 APP the Lido and Shows understanding of keeping the Lido factors affecting open business performance 3-4 of The Lido or the Developed impact of closing/ argument based staying open in context on either APP 3 closure of the Lido or keeping the Lido open Limited analysis of closing a Shows knowledge of 1-2 K + K business and 2 business performance keeping a business open Limited analysis of closing a K business or 1 keeping a business open No creditable content 0 1(d) Content Arguments for closure: • The Lido will be subsidised by other swimming pools/the Government – is this a good use of taxpayers’ money? • Would a different facility be better – one that could make a profit or cover its own costs? • Is the local area the best for a swimming pool – would government money be better spent on creating jobs? Arguments against closure: • Publically owned so profit is not the objective of the business – does it matter if The Lido makes a loss? • The Lido only makes a loss when the allocation of Head Office costs are included – is this a fair allocation? • The local community has high unemployment – closure is likely to affect these the most • There are many schools in the local area – the closure would reduce the ability for these to teach swimming. • The Lido benefits local fitness/combats obesity

Question 12

Katie’s Cakes (KC) KC is a partnership, owned by Katie and her son James. KC makes birthday cakes. Each cake is made using job production. …

Accepted Answer

2(a)(i) Define the term ‘demand’ (line 9). 2 Knowledge Marks B Quantity/at a given price/over a specific period of time 2 A Willing/able to purchase 1 No creditable content 0 Content The quantity/amount of a product that consumers are willing (not needs or wants) and able to purchase, at a given price or in a particular period. A diagram of the demand curve without further explanation up to 1 mark Exemplar Marks Rationale How much of a good or service (1) customers are willing to pay 2 Both A+B for (1) Amount of the product (1) the 2 Both A+B customer is able to buy Only A here as it is not the Amount of people (0) willing to 1 amount of people but the buy a product (1) quantity of the product %change in demand This is price elasticity of %change in price 0 demand, not demand 2(a)(ii) Briefly explain the term ‘partnership’ (line 1). Award one mark for each point 3 of explanation: Knowledge Marks Example or some other way of showing good C understanding e.g. shared risk/responsibility/profits/ 3 losses/finance B Unlimited liability/lack of continuity 2 A Two or more owners 1 Content A legal agreement between two or more people to jointly own, finance and run a business. Unlimited liability unless a limited partner. Share risks, profits, losses and responsibilities. Exemplar Marks Rationale Two or more people run a business together (1) usually with 3 Good, developed explanation shared capital (1) They have unlimited liability (1) Two or more people run a Explanation ok but not business (1) and provide the 2 developed capital (1) Run by at least 2 people (1) and Again explanation ok but 2 does not have limited liability (1) limited A mark for reference to Owned by two or more people (1) ownership but the rest of the without the ability to sell shares to 1 explanation seems to confuse the public (0) this with a ltd company 2(b)(i) Calculate the revenue generated from cakes with a jam filling. 3 Rationale Marks Correct answer, with or without working 3 Attempt with correct figures 2 Identification of Jam % 1 No creditable content 0 Content Jam = 10 % of sales revenue Total sales revenue = $1 m 10 % of $1 m = $100 000 Exemplar Marks Rationale $100 000 3 Correct answer 100 – 90 = 10 (1) Identifies 10% for jam and 1 000 000 (1) identifies correct sales revenue 2 of £1m and attempts to apply 100 = 10 000 but is incorrect Jam is 10% of revenue 1 Only calculates jam% 2(b)(ii) Explain one possible impact on KC of reducing the product portfolio of 3 the business. Level Knowledge and Application Marks 2b (APP Explanation of an impact of reducing the product 3 + APP) portfolio in context Identification of an impact of reducing the product 2a (APP) 2 portfolio in context 1 (K) Knowledge of product portfolio/knowledge of an impact 1 0 No creditable content 0 Content • Greater economies of scale from bulk buying more Cream and Chocolate • Specialisation by concentrating on Cream and Chocolate • May reduce customers due to a lack of variety – may not come to shop • Loss of 10% of sales revenue – will it decrease costs much? • Customers may not be able to have what they want – goes against the job production format of the business. 2(c) Analyse one advantage and one disadvantage to KC of using job 8 production. Knowledge and Anno- Anno- Analysis (4 marks) Level Application Mark tation Mark tation (4 marks) Shows Good analysis of APP+ DEV+ understanding one APP DEV advantage of job and one production in disadvantage to KC 2b 4 4 context of using job production Shows Good analysis of understanding APP one DEV advantage or of production one disadvantage 2a methods in 3 to KC of using job 3 context production Shows Limited analysis of knowledge of one advantage and AN+ 1b job production 2 KK one disadvantage 2 AN of using job production Shows Limited analysis of knowledge of one advantage or 1a production 1 K one disadvantage 1 AN methods of using job production 0 No creditable content 2(c) Content Advantages: • Customers can have their cake personalised to their requirements – increase revenue/profits • Allows KC to charge a higher price • Higher quality cakes – increase word of mouth promotion for KC Disadvantages: • Higher cost – requires specialist skills and inventory • Loss of economies of scale • Inventory is perishable but need to keep in stock, just in case • Higher price leading to lower demand ARA 2(d) Evaluate the job description created by James. 11 Knowledge and Analysis and Anno- Anno- Application Evaluation Mark tation Mark tation (4 marks) (7 marks) A justified recommendation/judg ement based on a developed argument 7 of at least two elements of the job description in context A developed recommendation/judg ement based on a developed argument 6 of at least two elements of the job description in context A basic recommendation/judg ement based on a developed argument 5 EVAL of at least two elements of the job description in context Shows Developed argument understanding of APP + of two elements of the two elements of the 4 4 APP job description in job description context created by James Shows Developed argument understanding of of one element of the one element of the 3 APP 3 job description in job description context created by James Limited analysis of K + K two elements of a job 2 Shows knowledge description of recruitment 1-2 process/job Limited analysis of descriptions K one element of a job 1 description No creditable content 2(d) Content • Specific job title – should only target those who are interested in this job. However, is it too specific – are KC likely to find enough of a pool of people? • Some of the items belong on a person specification. • Specific skills – produce and decorate cakes and creative. • Set hours of work – again should reduce the potential recruits – is it really seven days a week? • Why does the person need to be able to produce and decorate cakes when full training will be given? • Is it legal/ethical to state that the worker should be young? Why is this important? • No mention as to why the worker needs a driving licence? • Rate of pay is very vague – will this put potential applicants off? • Does not mention production method

Question 13

Ontime Taxis (OT) OT is a taxi business. OT is owned by two brothers who set up the business as a private limited company to benefit from l…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘limited liability’ (line 2). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content Any two of the following points: continuity, separate legal identity; shareholders; losses limited to investment/no personal risk. Exemplar Marks Rationale A business whose shareholders/owners are not personally responsible for any 2 Both elements met business debts A business whose owners personal assets will not be used to pay business 2 Both elements met debts A business whose owners have a 2 Both elements met separate legal identity to the business A shareholder can only lose the capital 2 Both elements met invested in the business No reference to Limited liability for business debts 2 owners/ shareholders When a business fails, the owners are Limited liability not 1 not responsible for the debts explained clearly A company is protected from financial 0 Not a correct definition loss No responsibility for business debts 0 Too vague 1(a)(ii) Briefly explain the term ‘competitive pricing strategy’ (line 3). 3 Award one mark for each point of explanation: Knowledge Marks C Example or some other way of showing good understanding 1 B Same price or lower or higher 1 A Price is based on what the competition changes 1 • C mark is dependent on A and B being present Content Basing the price on what the competition is charging. This may be to set the same price as the competition or, in most cases, to set a lower price than the competition. Exemplar Marks Rationale Basing the selling price in relation to the prices of competitors; e.g. a lower price 3 All elements met to attract customers To identify competitors prices and then 3 All elements met pricing lower to achieve more sales To set your prices lower than competitor 2 A and B businesses No example or To set your prices in relation to 1 extended competitor businesses understanding A way of pricing your good to make it 0 Too vague more attractive to purchase 1(b)(i) Using Table 2 and any other relevant information, calculate the break 3 even number of kilometres each month for vehicle Z. Rationale Marks Correct answer, with or without working or units 3 Correct use of figures (price – variable costs per unit) 2 Formula* 1 No creditable content 0 * Can be implied by use of figures ** Can be in the form of a diagram Content Fixed costs or fixed cost or TR = TC** Contribution price – variable costs per unit Contribution = $0.50 – $0.30 = $0.20 $380 $0.20 = 1900 kilometres Rationale Marks 1900 (with or without Km) (ignore miles, etc.) 3 $500 / $0.25 = 2000 (OFR for different car) 2 Fc / contribution 1 $2000 0 380 / 0.3 = 1266.66 (common but incorrect) 0 1(b)(ii) Explain one reason why break even analysis might not be useful to OT 3 when choosing the new vehicle. Level Knowledge and Application Marks Explanation of a limitation of break-even analysis 2b APP 3 in context Explanation of a limitation of break-even analysis 2a(K + K) 2 out of context 1(K) Identification of a limitation of break-even analysis 1 0 No creditable content 0 Content: • Costs could change, especially with a new car which could have accidents, etc. • Not just about the costs – quality/safety may be more important • How long will each car last – what is the maximum mileage? • Does not take into account profitability – If many miles above breakeven are completed then Car Y might be far more profitable Possible context Reason (K) APP Marks (K+K) Other factors in E.g. a non-financial E.g. boot space (in a 3 addition to cost factor car) So on the price of Costs could Which make the replacement car parts 3 change VC and FC change may be important As Car Y may be Does not take into May breakeven but more profitable if more account 3 not make a profit miles are covered As profitability the VC is lower 1(c) Analyse two external sources of finance OT could use for the new taxi. 8 Knowledge and Level Marks Analysis (4 marks) Marks Application (4 marks) Shows understanding Developed analysis of 2b of two external sources 4 two external sources 4 of finance in context of finance in context Shows understanding Developed analysis of 2a of one external source 3 one external source of 3 of finance in context finance in context Shows knowledge of Limited analysis of 1b two external sources of 2 two external sources 2 finance of finance Shows knowledge of Limited analysis of 1a one external source of 1 one external source of 1 finance finance 0 No creditable content Content • New shareholders – OT is a private limited company (LTD/LLC) so can sell shares but not to the general public. Loss of control of business. • Bank loan – can be secured or not on the car • Leasing – good option for a car as lower maintenance costs, etc. • Debt factoring • Hire purchase • Grant/government finance ARA Only award out of context answers (e.g. mortgage with L1 marks) Do not accept ‘buy the new taxi’ for app as in the question 1(c) Examples of Examples Examples of Examples of possible of external application/ possible developed sources context analysis analysis New In addition to the Means they have to Less future profits shareholders two brothers work harder Fixed monthly Help with Bank loan For $30 000 repayments budgeting saves $30 000 up Don’t need up- Leasing No loss on control front costs front investment Don’t need the Don’t need up- Own the car at the HP full $30 k up front front investment end of the period 1(d) Using Table 2 and any other relevant information, recommend the 11 market segment OT should target. Justify your recommendation. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) A justified recommendation based on a developed 7 argument of the suitability of one market segment in Table 1 A developed recommendation based on a developed 6 argument of the suitability of one market segment in Table 1 A basic recommendation based on a developed 5 argument of the suitability of one market segment in Table 1 Shows understanding of Argument of targeting two two market segments in 4 4 market segments in context context Shows understanding of Argument of targeting one one market segment in 3 3 market segment in context context Knowledge of two or Limited analysis of targeting 2 2 more market segments two market segments* Knowledge of one Limited analysis of targeting 1 1 market segment one market segment No creditable content 0 Using Table 1 and any other relevant information, recommend the market segment OT should target. Justify your recommendation. * If only one segment has been identified, any repeat AN’s should be marked as repeat so the counters show the correct analysis level Contents Shoppers: • Short journeys – low revenue • Long time period for journeys – could be higher number of customers • No brand loyalty – taxis will need to be conveniently placed • Taxis will need to be driving around to pick up customers – will increase variable costs

Question 14

Job Shop (JS) JS is a public sector organisation in country X. The mission statement of JS is in Fig. 1.1. To match up businesses that need…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘public sector’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content Organisations that are owned/controlled by the government (2). ARA* Exemplar Mark Rationale Businesses that are owned by the state 2 Correct definition The sector of the economy which is 2 Correct definition controlled by the government A business that is owned by the state 1 Partial because the and where shares are sold on the stock candidate has some exchange confusion with PLC Paid for by taxes 1 Partial understanding Run for the good of society 1 Partial understanding – it is run by the state for this reason Not in the private sector 0 No creditable content Not for profit organisation 0 No creditable content – confusion with a charity *ARA means ‘all reasonable answers. This allows for answers which are similar to the ones in the mark scheme and are correct. 1(a)(ii) Explain the relationship between a mission statement and a business objective Rationale Marks C Identification of the relationship between a mission 1 statement and a business objective B Understanding of a business objective 1 A Understanding of a mission statement 1 Note: allow any reasonable understanding of ‘aims’, ‘targets’ ‘goals’ in relation to mission statements and objectives. These terms are often used in completely different ways by different sources and so any reasonable use is acceptable if you believe the candidate has shown understanding of an objective and/or missions statement. Content • Objectives should be in line with the mission statement and move the business towards the mission statement (C) • A mission statement is a visionary aim for a business of the direction/purpose. (A) • An objective is a specific target that should have a time period in which to achieve it. (B) 1(a)(ii) ARA Exemplar Mark Rationale The mission is the aim (A) but the 3 All three elements business has the specific targets called objectives (B) to reach that aim (C) Achieving the objectives help move the 1 No explicit business towards the mission statement understanding of (C only) either an objective or a mission statement – only the relationship The mission statement sets out the 2 No explicit direction (A) and the objectives should understanding of help the business go in that direction (C). business objectives. A mission statement is something a 2 Both mission business wants to aim towards that may statement and be unattainable (A), whereas a business objective have been objective is a specific, measurable, understood but the achievable, realistic and times-based relationship is not goal that can be reached (B). explained. A mission statement is a visionary aim 2 Both mission for a business of the purpose (A). statement and Whereas an objective is a specific target objective have been that should have a time period in which understood but the to achieve it (B). relationship is not explained. 1(b)(i) Refer to Table 1.1. Calculate the rate of labour turnover for the whole 3 of JS in 2018. Rationale Marks Correct answer with or without correct working or % 3 Identification of correct figures from Table 1.1 used in formula 2 Correct formula* 1 No creditable content 0 *Formula can be implied through the correct use of figures Content Number of employees who left × 100 Total number of employees 6250 + 550 + 600 × 100 25000 + 5000 + 10000 7400 × 100 40000 = 18.5% OFR* 1(b)(i) Common incorrect answers Answer Mark Rationale 18.5 3 Correct answer – does not require % sign 7400 2 A mistake in the = 0.185 (implied) knowledge 40000 of the formula by not multiplying by 100 (turning it into a percentage) 0.185 (no working) 0 There is no reference to where this (wrong) answer came from, so no marks. 40000 2 Inverted formula – × 100 = 540.54% but correct figures 7400 and OFR for the answer. 6250 2 Implied formula × 100 = 25% correct, but wrong 25000 use of figures. However, based on those wrong figures the answer is correct using the OFR. 6250 1 Implied formula × 100 25000 *OFR means the use of the own figure rule – this aims to reward a candidate for the stages of a calculation that are correct, even if an earlier stage or figure used is incorrect. An early mistake, for example, would create all following calculations to have wrong answers, but these are still rewardable (if correct when using a candidate’s own figures) Therefore the candidate cannot gain marks for the stage that was incorrect, but can gain all the subsequent marks. 1(b)(ii) Explain one disadvantage for JS of having high labour turnover. 3 Level Knowledge and Application Marks 2b (APP) Explanation of one disadvantage of high labour 3 turnover in context 2a (K+K) Explanation of one disadvantage of high labour 2 turnover 1a (K) Identification of one disadvantage of high labour 1 turnover 0 No creditable content 0 Content • Increased recruitment costs – these are highly trained and skilled employees so difficult to replace. Also, as a public sector organisation, this reduces funding for other government spending. • Loss of productivity – time-lag between losing workers and gaining new workers – JS still needs to run. New employees are unlikely to be as productive as experienced employees. Might give poor customer service or result in less employment opportunities – highest labour turnover in customer service department. • Cost of training/induction – new employees will need to be trained in customer service. • Poor reputation – might be difficult/take longer to hire new workers • Lowers motivation/demotivates ARA and OFR Example of how responses should be marked Identification of a Explanation of a Explanation of a disadvantage disadvantage (2 disadvantage in (1 mark) marks) context (3 marks) Increased costs (K) Increased costs (K) Because the workers because those workers are highly skilled and who leave JS will need trained JS will have to be replaced which high recruitment costs adds to the recruitment when they leave (APP) costs (K) People might not People might not want It may be become very want to work at JS to work at JS (K) which difficult to recruit (K) will make recruitment people, especially in much more difficult (K) department A (APP) *OFR in this case is if a candidate has used an incorrect answer from 1(b)(i) – if their explanation is correct using their own figures then ALL marks can be rewarded in this question. 1(c) Analyse one economy of scale and one diseconomy of scale which 8 may affect JS. Level Knowledge and Marks Analysis (4 Marks Application (4 marks) marks) 2b Shows 4 Developed 4 understanding of analysis of one one economy economy and and diseconomy diseconomy of of scale in scale in context context 2a Shows 3 Developed 3 understanding of analysis of one one economy or economy or diseconomy of diseconomy of scale in context scale in context 1b Shows 2 Limited analysis of 2 knowledge of one one economy and economy and diseconomy of diseconomy of scale scale 1a Shows 1 Limited analysis of 1 knowledge of one one economy or economy or diseconomy of diseconomy of scale scale 0 No creditable response LARGEST is contextual as it is stated in the case. However LARGE is not as it is generic to most/all businesses experiencing economies of scale. Content A candidate does not need to name an economy or diseconomy of scale – a description is good enough (for example ‘bulk buying’ is enough to award purchasing economies of scale). 1(c) Economies of scale: • Managerial economies of scale – for example personnel managers who may be able to deal with JS labour turnover issue • Marketing economies of scale – many outlets in every main town and city means that marketing costs can be averaged out over a large number of outlets • Purchasing (allow bulk buying) economies of scale – in terms of administration items (do not accept bulk buying of inventory unless it is in context as this is a service sector business) • Technical (do not reward technological) economies of scale – better admin computer software/systems • Financial economies of scale – government backing likely to be more important than size but JS is still more likely to get favourable financial terms due to their size. • Risk bearing – unlikely to be contextual as JS only focuses on one/two services Diseconomies of scale: • Communication problems – outlets must cooperate with each other to maintain good customer service. • Poor leadership – 25% of labour turnover is due to poor leadership – too many workers to lead? • Poor motivation – Is the high labour turnover and issues due to the size of the business? • Bureaucracy – 10 000 admin workers suggest a great deal of ‘red tape’ • Duplication of effort – Each outlet likely to have the same job-role repeated. Allow external economies or diseconomies of scale – ARA Example of an Examples of Examples of possible economy of scale application/context analysis (AN + DEV) (K) (APP) Marketing Because JS has an JS can use nationwide economies of outlet in every major advertising campaigns scale town and city which are likely to have less cost per potential customer who sees it (AN) which means JS has more money to spend on finding people jobs (DEV) 1(c) Example of a Examples of Examples of possible diseconomy of application/context analysis (AN + DEV) scale (K) (APP) Communication Because JS is spread This means that diseconomies of out over the whole of messages may not get scale country X properly communicated and some jobs might not get filled (AN) meaning that JS does not get as many people out of unemployment (DEV). 1(d) Recommend how JS could improve the motivation of its employees in 11 Department A. Justify your recommendation. Knowledge and Marks Analysis and Mark Application (4 marks) Evaluation s (7 marks) Justified recommendation 7 based on argument in context Developed 6 recommendation based on argument in context An evaluative statement / 5 recommendation based on argument in context Shows understanding of 3–4 Developed argument 4 (de)-motivation in the (balanced**) based on customer service way(s) which JS could department improve motivation in the customer service department Developed argument 3 (imbalanced*) based on one way which JS could improve motivation in the customer service department Shows knowledge of 1–2 Limited analysis of way(s) 1-2 (de)motivation which a business can improve motivation No creditable content 0 1(d) *Imbalanced argument is when a candidate only looks at what is good or bad about only one way. **Balance in an argument can be gained by looking at more than one way OR by having developed analysis of is good and developed analysis about what is bad about one way Content • Increase pay/financial motivation – 30% of leaving employees are leaving for ‘poor pay’. However, can the government of county X afford a pay increase? • Non-financial motivation – 20% leaving because of a boring job (job enrichment/enlargement/rotation – improve motivating factors etc.), more delegation etc. • Increase levels of hierarchy to improve promotion chances. 5% of workers leaving for this reason. • Allow movement between outlets – 5% have moved to another town – JS may be able to keep them in the business by offering them a job in another outlet. • Improve leadership – is JS using the right leadership styles? Do the managers need training? • Improve training – employees are highly skilled and trained, but maybe they could be offered more to keep them in the business. In particular, training on how to deal with customers as this is a major reason for the turnover. • Make more social opportunities for staff • Improve recruitment and selection processes – are people leaving because they were not the right people in the first place? 1(d) ARA An example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL JS could This may be This is likely Which will Overall pay pay its effective to lead to decrease could help to workers because less people the improve the better to 30% of leaving recruitment motivation of motivate people who Department costs of JS the them (K) leave think A (AN) (DEV) employees that JS has in poor pay Department (APP) A (EVAL) However, And there So, the extra Which because it money does are many pay may not means that has the not motivate other motivate the JS has less highest everyone reasons why employees money labour (K) employees but will available to turnover rate leave JS, increase meet their and the such as the costs (AN) mission biggest 25% of statement reason is people who (DEV) poor pay leave (EVAL). because of poor However, it leadership depends on (APP) whether JS can afford to increase pay enough to make a real difference to the motivation of the employees (EVAL).

Question 15

First Nature (FN) FN is a co-operative farm producing milk, beef and vegetables. Products are sold in its shop and at local farmers’ market…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘mission statement’ (line 2). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: Do not allow objectives or confusion with a business’s objectives Answers could include: A written summary of an organisations main purpose / focus. Usually doesn’t change over time. Shows what is important to the organisation, communicates sense of intended direction to external and internal stakeholders. May give examples. A correct definition should include two aspects of a mission statement, for example two of the of the following: • Vision / beliefs • Purpose • Goals • Values • Focus • Marketing / communication – attract customers • (Core) aim • Motivational • Long term • Sense of direction • Creates interest by external groups • Communicates to stakeholders • It is not an objective Exemplar Mark Rationale The goals and aims of a 2 Two aspects business Statement of an organisation’s 1 Simple but correct definition vision Document showing the purpose 1 Partial definition of a business A mission statement is a 0 Do not reward linking to statement of objectives being an objective 1(a)(ii) Explain the term ‘co-operative’ (line 1). 3 Award one mark for each point of explanation: Example or some other way of showing good understanding, e.g. bulk buying, common in 1 mark C agriculture, motivational, slow decision making, allows Pink the achievement of economies of scale etc. • Responsibilities are shared • Owners may contribute to the running of the 1 mark B business Yellow • Shared decision making • All members have one vote • Owned / financed by workers / customers / 1 mark A members Blue • Profits are shared Note: using the case as an example is repetition and not rewardable as the C mark A co-operative is a business structure where the workers are the owners. The profits are shared with workers. Workers (owner) do not have to run the business, they will vote for Directors. In smaller co-operatives such as co- worker operatives then workers may also run the business. Exemplar Mark Rationale Members (A) own a co-operative and share the running (B) of the business. QL is a 3 A, B and C worker co-operative which mean the workers are the members (C). A co-operative can be owned by customers or workers (A) who will each have a vote 3 B and C (B). Because they own it, they are motivated for it to do well (C). A co-operative has shared profit (A) and 2 A and B responsibilities (B) Members (A) who join together to benefit 2 A and C from bulk buying (C) A co-operative is made up of people who Three points but share the responsibilities of the business 1 all from so only (B). Each person has a vote and the one mark. decision making is shared. 1(b)(i) Refer to Table 1.1. Calculate the value of X in quarter 4. 2 Rationale Marks Correct answer with or without correct working or $ or 000s 2 Correct formula* or the correct identification of figures 1 No creditable content 0 *Correct formula can be implied through the use of figures Formula: Opening balance + cash in – cash out –$100 000 + $200 000 – $10 000 = $90 000 (accept 90) Answer Mark Rationale 90 (no working) 2 A correct answer 200 – 10 – 10 = 180 1 Only mistake is doubling up the cash 180 – 100 = 80 out figure, so one mark –100 + 200 – 20 = 80 1 Formula implied through use of figures (i.e. one added and one subtracted from opening balance) but wrong cash out and wrong answer 0 A wrong answer with no working to 80 (no working) show thinking $100 000 + $10 000 = 0 Formula is obviously wrong and 110 000 answer is also wrong 1(b)(ii) Explain two benefits to FN of cash flow forecasting. 4 Level Knowledge and Application Marks 2b Explanation of two benefits of cash flow 4 (APP+APP) forecasting in context Explanation of one benefit of a cash flow 2a (APP) 3 forecasting in context 1b (K+K) Identifies two benefits of cash flow forecasting 2 1a (K) Identifies one benefit of cash flow forecasting 1 0 No creditable content 0 Note: an answer which explains ONE benefit in context (i.e. APP annotation) gains 3 marks. Content is likely to come from: • Identifies potential cash shortfalls – If a business runs out of cash and is able to obtain new finance, it will become insolvent. • To measure the financial performance of the business • Makes sure the business can pay debts / bills • Identifies potential problems with customer payments • Allows better management of a business’s finances • To give information to other stakeholders, e.g. banks • Identify potential shortfalls in cash balances in advance – ‘early warning system’. Note: cash flow forecasting does not allow a business to forecast profit / loss Context may come from: • Expansion • Use of numbers from Table 1.1 • Purchase of neighboring farm • Answer to 1(b)(i) Example of how responses should be marked: Identification of a benefit of Explanation of a benefit in context cash flow forecasting (K) (APP) Manage cash To see if they can afford to expand Identify times when they do not For example in the first three quarters have cash 1(c) Analyse two sources of finance, other than selling shares, FN could 8 use to purchase the neighbouring farm. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding Developed analysis of two sources of 4 two sources of 4 finance in context finance in context 2 Shows understanding Developed analysis of of one source of 3 one source of finance 3 finance in context in context Shows knowledge of Limited analysis of two sources of finance 2 two (or more) sources 2 of finance 1 Shows knowledge of Limited analysis of 1 1 one source of finance one source of finance 0 No credible content Note: do not reward the sale of share OR the change of legal structure to a PLC (unless it is totally unrelated to share issue) Content: Internal sources of finance: • Retained earnings • Sale of unwanted assets • Sale and leaseback of non-current assets • Working capital External sources of finance: • New partners • Venture capital • Overdrafts • Leasing • Hire purchase • Bank loans • Mortgages • Debentures • Micro-finance • Crowd funding • Government grants 1(c) Could choose any source of finance but, from the context, most likely to consider getting more members in the co-op or obtaining a bank loan – analysis and understanding will come from the context Note: ‘internal’ and ‘external’ can be sources of finance in themselves Contextual analysis likely to come from: • Amount to raise is $80 000 (or $140 000 based on negative cashflow) • One option discussed to invite more members of the co-op • Bank loan – cash flow predicts a healthy surplus in just over a year • Internal finance may not be suitable as FN has limited capital / poor cashflow • Being a co-operative Example of Examples of application Examples of possible a source of / context (APP) analysis (AN + DEV) finance (K) Bank loan Been established for 10 Interest will have to be repaid years so likely to be (AN) which may mean that FN granted has even worse cashflow (DEV) Mortgage The farm is a property so Mortgage would have a lower a mortgage would be interest rate than a bank loan suitable (AN) but still reduces the profits of the business (DEV) 1(d) Evaluate the likely impacts on the local community if FN changes from 11 a co-operative to a public limited company. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based 7 on arguments in context Developed evaluation based on arguments in 6 context An evaluative statement based on arguments in 5 context Argument based on two impacts of FN changing from a co-operative to a 4 public limited company on Shows understanding of the local community changing from a 3–4 cooperative to a public Argument based on one limited company in context impact of FN changing from a co-operative to a 3 public limited company on the local community Limited analysis of two impacts of a change in 2 legal structure a local Shows knowledge of community changing from a co- 1–2 operative to a public limited Limited analysis of one company impact of a change in legal 1 structure on a local community No credible content 0 Note: local community could include customers, neighbouring farms, suppliers. Internal stakeholders are not local community, such as investors and members. 1(d) This is a question about changing legal structure, not creating jobs. If knowledge of changing legal structure has been shown, then creating jobs can be an impact (i.e. analysis) but no reward if that knowledge has not been shown earlier in the answer. Context / content: • Customer focused business – will it alienate their customer base • Will prices rise as shareholders would want high profit / dividends • Culture of a PLC very different to a co-operative • Will it affect working relationships • Not all members agree so already causing conflict • Could provide finance for the expansion and no interest to pay • Provide income for members • Would have to appoint Board of Directors – members might all want to be on the board • Currently all have equal rights – this could change • Will it change mission statement especially in relation to local community? • Will it change plans for use of additional land from education and events for the local community? • Will it still commit to sustainable farming? • Neighbouring farms may fear possible takeover An example of how an answer could develop and how it should be annotated: K APP AN A PLC can sell shares It could use the capital It can afford to employ (K) so FN can gain to open more local more people from the more capital (K) farm shops (APP) and local community (AN) provide more and living standards educational would rise (AN) programmes (APP) A PLC can sell shares FN may no longer offer To increase profits to the general public educational prices may go up (AN) (K) its main business programmes (APP) or lower quality objective is profit and may cut costs by products offered (AN) maximization (K) using lower quality seeds (APP) 1(d) DEV EVAL If shops are nearby In the short-term then this will be more converting to a PLC convenient for local will benefit the people who will buy community (EVAL) as their daily foods more they will have lower easily which will reduce living costs and higher travelling costs (DEV). incomes from employment (EVAL). More educational programmes will mean In the long run the that more local people educational can benefit from these programmes will also programmes and their give them skill levels will increase qualifications which and they will be more will make it easier for employable (DEV) those people to get better paid jobs (EVAL) FN’s mission to The impact on the contribute to the local local community will be community may no negative (EVAL) as longer be an aim and they will not be offered the local community programmes to will not be able to increase their skill benefit from the levels and educational employability (EVAL) programmes (DEV) and, at the same time, The rise in the price of will face lower living products will impact the standards as there is a local community, greater impact on especially the poorest, income, from paying as they will be unable higher prices for a to buy as much and necessity (EVAL) food is a necessity (DEV)

Question 16

Super Heroes (SH) SH is a leisure (theme) park aimed at 10–18 year olds. It is owned by two companies, X and Y, which started SH as a joint…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘joint venture’ (line 2). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A business arrangement where two or more businesses (parties) agree to pool resources for a specific task. A business entity created by two or more businesses with a common interest. 1(a)(ii) Explain the difference between ‘redundancy’ and ‘dismissal’ (line 28). 3 Award one mark for each point of explanation: Knowledge Marks Explanation of the difference between A 3 redundancy and dismissal B An understanding of redundancy (may be implied) 1 C An understanding of dismissal (may be implied) 1 Content: • Redundancy is where an employee is made to leave an organisation because their job role is no longer required. • Dismissal is where an employer ends a worker’s employment • The difference is that redundancy is about the job role not being required any more, whereas dismissal is when the employee is no longer required. (A mark, B and C implied) • Redundancy can only happen after two years’ service, whereas dismissal can occur at any point in employment. (A mark, B and C implied) ARA 1(b)(i) Refer to Table 1.1 and any other information. Calculate the total revenue 4 from entrance tickets for SH in 2019. Rationale Marks Correct answer with or without correct working or $ 4 Correct calculation of number of customers 3 Correct calculation of TVC 2 Formula 1 No creditable content 0 Note: A correct answer must (in some way) be expressed in millions (e.g. m) Answer = $110m TC − FC Quantity = VC (per unit) $42m – $12m = $30m (TVC) $30m = 10m customers $3m 10m × $11 = $110m revenue 1(b)(ii) Explain one way in which SH could increase the sales of entrance tickets. 2 Level Knowledge and Application Marks 2 Explanation of a way to increase sales of 2 (APP) entrance tickets in context 1 (K) Explanation of a way to increase sales/revenue 1 0 No creditable content 0 Note: This question is specifically about ‘entrance tickets’. Answers which focus on increasing revenue by other means (e.g. restaurants, fast-track etc.) are unlikely to be contextual. The hotel option gives customers FREE entrance tickets so is unlikely to be contextual. Content: • Develop the rides e.g. the VR ride • Decrease the price – may be elastic because of competition • Selling through different distribution channels e.g. advance tickets, online tickets etc. • Promotion – any method in context ARA 1(c) Analyse two factors that may have determined the location of SH. 8 Knowledge and Analysis (4 marks) Level Marks Marks Application (4 marks) Shows understanding Good analysis of two (or of two (or more) more) factors which may 2b factors which may 4 determine location in 4 determine location in context context Shows understanding Good analysis of one of one factor that may factor that may 2a 3 3 determine location in determine location in context context Shows knowledge of Limited analysis of two two (or more) factors (or more) factors which 1b 2 2 which may determine may determine location location Shows knowledge of Limited analysis of one 1a one factor that may 1 factor that may 1 determine location determine location 0 No creditable content Content: • Access to employees – SH employs 200 f/t workers and 50 seasonal • Access to suppliers – restaurants, shops, builders etc. • Space – large rides (2 km2 of land), car park etc. • Access to customers – 10m customers a year • Access to raw materials – water rides etc. • Infrastructure – ease of access for visitors ARA 1(d) Recommend which one of the two options SH should choose for internal 11 growth. Justify your recommendation. Knowledge and Application Analysis and Evaluation Marks Marks (4 marks) (7 marks) Justified evaluation based 7 on arguments in context Developed evaluation based on arguments in 6 context An evaluative statement based on arguments in 5 context Shows understanding of the Arguments based on the two options for internal 3–4 two options for internal 3–4 growth growth Shows knowledge of internal Limited analysis of internal 1–2 1–2 growth growth No creditable content Content: Option 1: A new Virtual Reality (VR) ride • May improve the popularity of the theme park • New modern technology (VR) is likely to appeal to the target market (10– 18 year olds) • Significantly lower cost than hotel ($2m compared to $15m) • Less time closed (3 months compared to a year) • Can be completed in off-peak time • No redundancy payments or risk of unfair dismissal Option 2: A hotel • Keep up with competitors • New revenue source – high price rooms • More opportunity to spend longer time in park – restaurants, shops etc. • May be an opportunity to get rid of poorly performing employees (are they the reason why customers have decreased on the Iron Blaster ride?) ARA

Question 17

Aashna’s Pies (AP) AP produces and sells high quality pies. Aashna set up AP five years ago when she spotted a gap in the market. AP is a p…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘shareholder’ (line 3). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A correct definition should include the following elements (allow one mark for each element): • Owns part/a percentage • …of a company/limited liability business Exemplar Mark Rationale Owns a part of a limited 2 All elements met company Owns a percentage of a limited 2 All elements met liability business Owner of a limited company 1 Needs ‘PART’ owner Has share in/invests capital in 1 Shares is taut/all business a company structures require investment Control and ownership are not 0 Do not award for control the same thing 1(a)(ii) Explain what is meant by the term ‘flow production’ (line 16). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good 1 understanding B An understanding of it being a production process 1 A An understanding of flow 1 C based on A OR B Content Flow – a large number of standardised products / constantly produced Production process – the fact it is a process. 1(b)(i) Refer to Table 1.1. Calculate the total revenue gained from Vegetarian 3 Victory pies in 2019. Rationale Marks Correct answer with or without correct working or $ 3 Formula (can be implied) and correct calculation of 2019 3 sales Formula (can be implied) or correct calculation of 2019 1 sales No creditable content 0 Note: any relevant figure multiplied by the price implies the correct formula (i.e.5000 x $2.50) Content TR = Price × quantity 5000 – 10% = 4500 4500 × $2.50 = $11 250 Answer = $11 250 OFR Common answers Answer Mark Rationale 11 250 3 Correct answer – does not need $ (–) $1250 with 2 Worked out –10%, used the correct calculations formula but wrong final answer 1250 with no 0 Wrong answer calculations 1(b)(ii) Explain one way in which AP could use product portfolio analysis. 3 Level Knowledge and Application Marks 2b Explanation of a way AP could use product 3 portfolio analysis in context 2a Explanation of a way a business could use 2 product portfolio analysis 1 Identification of a way a business could use 1 product portfolio analysis 0 No creditable content 0 Content • To identify when to discontinue products – VV is in decline • To identify when to market products – FF is growing • To identify when to develop new products – what happens when FF reaches maturity? • To identify when to extend the PLC of products – MM or VV Examples Identification of Explanation Possible context a use Identify stage of Shows how well Such as meaty marvel in product life cycle the product is maturity doing Identify which So can plan a E.g. meaty marvel product is mature replacement 1(c) Analyse two economies of scale that AP might lose if the business 8 reduces the total number of pies produced. Knowledge and Analysis Level Application Marks Marks (4 marks) (4 marks) 2b Shows 4 Good analysis of 4 understanding of losing two (or more) two (or more) economies of scale in economies of scale context in context 2a Shows 3 Good analysis of 3 understanding of losing one economy one economy of of scale in context scale in context 1b Shows knowledge of 2 Limited analysis of 2 two (or more) two (or more) economies of scale economies of scale 1a Shows knowledge of 1 Limited analysis of 1 one economy of one economy of scale scale 0 No creditable content Content • Technical – capital intensive mass production • Specialisation/managerial – specialist workers make the fillings • Marketing – AP brand is growing in popularity • Purchasing – AP can bulk buy certain ingredients – pastry is shared across all pies and cheese is also used in FF • Financial – AP brand may make it easier/cheaper to fund any new product development/expansion Allow external economies of scale. 1(c) Example of an Examples of Examples of possible economy of application/context analysis (AN + DEV) scale (K) (APP) Specialisation Each filling e.g. VV Lose knowledge of flavour made by specialists profiles which may change the taste and lose custom Purchasing Vegetables for Miss out on bulk buy deals Vegetarian Victory which increases the variable costs of the pie 1(d) Recommend how AP could develop its products in the future. Justify 11 your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified recommendation 7 based on argument(s) in context Developed recommendation 6 based on argument(s) in context An evaluative statement/recommendation 5 based on argument(s) in context Shows understanding 4 Two or more arguments of two or more based on how AP could 4 elements of product develop its products in the development in context future Shows understanding 3 One argument based on how of one element of AP could develop its products 3 product development in in the future context Shows two or more Limited analysis of two or pieces of knowledge of 2 more impacts of product 2 product development development on a business Shows one piece of Limited analysis of one knowledge of product 1 impact of product 1 development development on a business No creditable content 0 1(d) Content • Reduce the meat in the MM to meet concerns over health risks. • Pies could be sold into sets of three pies to suit families. • Pies could be sold in variety packs so that it suits a family’s tastes and those who do not eat meat. • Could the pies be developed to have a longer ‘best before’ date or frozen to allow for a longer shelf life? • The price could be increased to allow for the development of a new product or to fund the redevelopment of an existing product. • The data suggests that the MM should be redeveloped to extend the PLC – could it have less meat to meet health concerns? • VV could be redeveloped now that it is in decline, to increase sales – or a new vegetarian product could be developed to replace the VV – importance of non-meat alternatives. Examples K APP AN DEV EVAL Longer Short BB Could be Improve Most shelf life date – eat stored for transport important within 2 longer economies of element is to days scale increase shelf life Increase As Attract new Increase as this number of consumers customer revenue/profits reduces vegetarian worried base wastage / pies about increases health range of risks of outlets, meat which leads to increased total sales

Question 18

Braid Runner (BR) Lewis is a hairdresser. He rents a small shop which he uses as a hairdressers called Braid Runner (BR). Lewis is a sole t…

Accepted Answer

2(a)(i) Define the term ‘price’ (line 6). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A correct definition should include the following elements (allow one mark for each element): • The amount of money for a product or service • charged to a customer Exemplar Marks Amount paid by a customer 2 Amount of money to consume 2 Value to the customer 2 Amount charged by a business to the customer 2 What the customer pays 1 Amount charged by a business 1 2(a)(ii) Explain the term ‘franchises’ (line 5). 3 Award one mark for each point of explanation: An element of explanation of franchises: Up to 2 further • May pay a royalty marks • Can be restrictive • May pay an initial fee • May pay advertising costs • Likely to increase sales • Examples Understanding of the use of logo, products etc. from 1 mark an established business Content Where a business sells the rights to use its logo, products, ideas, etc… to another business. A business which has bought the rights to use another businesses’ logo etc… Exemplar Mark Rationale Pay to use the logo, products. May have 3 Three points to pay royalties but is likely to increase sales Pay to use the logo, products. May have 2 Only one development to pay royalties Where a business sells the rights to use 1 Main understanding its logo, products, ideas, etc… only May have to pay royalties but is likely to 0 No understanding of increase sales the use of logos etc 2(b)(i) Refer to Table 2.1. Calculate the break-even quantity of haircuts in a 3 week. Rationale Mark Correct answer with or without correct working or ‘haircuts’ 3 Correct formula (may be implied) and correct calculation of 2 contribution Correct formula or correct calculation of contribution 1 No creditable content 0 Content: Fixed costs Formula: Price − selling price (contribution) $675 (1) $8 − $3.50 $675 $4.50 (contribution) Answer = 150 (haircuts) OFR Common incorrect answers Answer Mark Rationale 150 3 Correct answer – does not need units formula 1 Basic understanding 2(b)(ii) Explain one possible limitation for Lewis of using break-even analysis 3 Level Knowledge and Application Marks 2b Explanation of one limitation of using break-even 3 analysis in context 2a Explanation of one limitation of using break-even 2 analysis 1a Identification of one limitation of using break-even 1 analysis 0 No creditable content 0 Content • Variable costs ($3.50) may change – especially with a new hairdresser starting • Fixed costs per week ($675) may change • Lewis may need to change the price ($8) especially with competition in the city • It assumes every haircut is the same price, but Lewis may charge less for children, OAPs etc. OFR (from Q2(b)(i)) Identification of Explanation Possible context a limitation Only a prediction So does not take E.g. may increase from unexpected debts into £3.50 if new hairdresser consideration starts Only an estimate Fixed costs may From $675 change Assumes all But may vary with E.g. may charge less for services charged discounts OAP haircuts same price 2(c) Analyse one advantage and one disadvantage for Lewis of operating 8 as a small business. Level Knowledge Marks Analysis (4 marks) Marks and Application (4 marks) 2 Shows 3–4 Good analysis of one 4 understanding disadvantage and one of small advantage of being a small business in business in context context Good analysis of one 3 disadvantage or one advantage of being a small business in context Shows 1–2 Limited analysis of one 2 knowledge of disadvantage and one 1 small business advantage of being a small business Limited analysis of one 1 disadvantage or one advantage of being a small business 0 No creditable content Content Advantages: • Easier to organise – Lewis is the only employee (at the moment), only one set of bookings etc. • Flexibility – Lewis can quickly and easily respond to marketing form the franchises – they however are unlikely to be able to respond as quickly. • Personalised customer service – Lewis has many repeat customers – this suggests he has a good relationship which is probably lacking in a bigger business. Disadvantages: • Access to finance – Lewis may struggle to obtain finance because he on his own and may have limited assets. Shop is rented. • Larger franchises may be able to gain economies of scale which will not be available to Lewis – they are able to charge lower prices and undercut Lewis. • Limited funds to compete against the competition – they are likely to be able to afford above the line promotion methods whereas Lewis is unlikely to be able to access these. 2(c) Example of Examples of Examples of possible knowledge (K) application/context analysis (AN + DEV) (APP) Unlimited liability Sole trader So personal possessions are at risk and could lose his house Easy to organise There is only one Does not have to create employee (himself) rotas which reduces time taken for paperwork 2(d) Refer to Fig 2.1 and any other relevant information. Evaluate the 11 usefulness of the person specification when recruiting another hairdresser. Knowledge and Analysis and Evaluation Application (4 Marks Marks (7 marks) marks) Justified evaluation based 7 on argument in context Developed evaluation based 6 on argument in context An evaluative statement based on argument in 5 context Shows understanding Argument based on two of two aspects of a 4 aspects of a person 4 person specification in specification in context context Shows understanding Argument based on one of one aspect of a 3 aspect of a person 3 person specification in specification in context context Shows knowledge of Limited analysis of two two aspects of a 2 aspects of a person 2 person specification specification Shows knowledge of Limited analysis of one one aspect of a 1 aspect of a person 1 person specification specification No creditable content Content Lewis needs an employee to work on their own, be responsible for bookings, deal with customers and do some financial transactions. • Hairdressing qualification makes sense and would be a good way to differentiate between those who might be able to do the job and those who cannot however is a formal qualification needed if the experience is in place? • A-Levels (or high school standards) in Mathematics and Business seems a high level of qualification for what Lewis needs. May restrict the number of applicants. • It may be illegal to set an age limit – why does the employee need to be between 18 and 30 years old? May restrict applicants and Lewis may end up fined. 2(d) • Specifying a female may be illegal. Why would a female make a better hairdresser? Is it to compliment Lewis (who may specialise in men’s hair) in which case the person specification may be poorly written (need someone who specialises in women’s hair) • No experience, as essential, seems unlikely – Lewis needs them to work on their own – the desirable column should be essential to get what he wants and not waste his time sifting through applications which are unsuitable (for trainees). • Why is ability to work in a team essential when the person will be working on their own? • Good communication makes sense and should help Lewis to maintain his loyal customers. • What does friendly mean – why is it desirable? Is this linked to customer service – could be more specific. Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Provides a list E.g. Limits Saves The PS are of essential hairdressing applicants interviewing useful and desirable qualification to those time because they who can do limit the the job number of candidates May be Between May lead to Which and any illegal/ 18–30 a fine reduces illegal/wrong discriminatory profits elements can be easily changed to ensure only quality applicants apply

Question 19

Free Burgers (FB) FB is a private limited company that produces premium meat‑free burgers. FB has two shareholders, Bill and Sanjay. They e…

Accepted Answer

2(a)(i) Define the term ‘private limited company’ (line 1). 2 Knowledge Marks A full definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: a correct definition should not confuse a private limited company with any other form of legal ownership. A full definition should cover the following elements: • owners have limited liability • cannot sell shares on the stock market. Content: A business with limited liability and shares cannot be sold on the stock market (2) An incorporated business and shares can only be offered to specified people (2) A business with limited liability (1) Can only offer shares to specified people (1) An incorporated business (1) Do not credit ‘A company with private owners’ as TV. 2(a)(ii) Explain the term ‘shareholders’ (line 2). 3 Award one mark for each point of explanation Knowledge Marks Example or some other way of showing good 1 understanding, e.g. a benefit of being a shareholder; dividends, invite to AGM etc. Some understanding that it is ownership of part of a 1 company Understanding of ownership of a business (buys, 1 purchases, invests etc.) Content: Owner (1) of a part of a business (1) and receives dividends (1) A person or company that owns (1) at least one part of a business (1) and benefit from a rise in the value of a company (1) The owner (1) of a part of a business (1) Owns the business (1) Other appropriate responses should also be credited. Do not accept share in a company. 2(b)(i) Refer to table 2.1. Calculate the gross profit margin for 2020. 3 Rationale Marks Correct calculation (with or without working or %) 3 Correct use of figures 2 Correct formula 1 No credible content 0 Note: formula can be implied form correct use of figures Gross profit Gross profit margin = × 100 Revenue $12000000 Gross profit margin = × 100 = 48% $25000000 Do not accept an incorrect answer e.g. 0.48 without working. 2(b)(ii) Explain one possible reason for the change in FB’s Gross Profit 3 Margin. Level Knowledge and Application Marks 2 Explanation of one reason for a change in gross 3 (APP + profit margin in context APP) 1b Explanation of one reason for a change in gross 2 (APP) profit in context 1a Identification of one reason for a change in gross 1 (K) profit 0 No creditable content 0 Knowledge: A change in gross profit margin is likely to come from: • A decrease in costs – whilst maintaining (or increasing revenue) revenue • An increase in revenue – whilst maintaining (or decreasing costs) Context is likely to come from: • GPM is increasing from 33.33% to 41.67% to 48% (OFR from Q2bi) • Revenue has increased from $1.8m to $7.2m to $25m • Brand awareness has increased • Market share has increased • Demand for premium meat-free burgers has increased in country Q • FB uses semi-skilled workers • FB uses batch production Exemplars: Revenue has increased (K) from $1.8m in 2018 to $25m in 2020 (App) but costs have not risen by as much as revenue (App) FB is selling more (K) because the market share has increased (App) and gained economies of scale (App) Other appropriate responses should also be credited. 2(c) Analyse one advantage and one disadvantage to FB of changing from 8 batch production to flow production. Level Knowledge and Marks Analysis Marks application 2 Shows 4 Developed analysis 4 understanding of one advantage of both batch and one and flow disadvantage of production in changing from context batch to flow production in context Shows 3 Developed analysis 3 understanding of one advantage of batch or flow or one production in disadvantage of context changing from batch to flow production in context 1 Shows 2 Limited analysis of 2 knowledge of one advantage and both batch and one disadvantage flow production of changing from batch to flow production Shows 1 Limited analysis of 1 knowledge of one advantage or batch or flow one disadvantage production of changing from batch to flow production 0 No creditable content 0 Note: annotate advantages in left-hand margin and disadvantages in right- hand margin. Knowledge: • Batch production • Flow production 2(c) Application: • Premium meat-free burgers • Semi-skilled workers • Burgers are promoted as ‘hand-made’ • Demand for premium meat-free burgers increasing • FB’s brand awareness and market share has been increasing • Good customer retention • Factory not modern enough to keep up with demand • Need for an external source of finance Analysis: Advantages may include: • Faster production • Uniformity of production • Increased quality (fit for purpose) • Economies of scale • Lower labour costs Disadvantages may include: • Decreased perceived quality (less premium) • Reduced employee motivation • Initial capital cost • Possible decreasing demand in the future Other appropriate responses should also be credited. 2(d) Recommend which source of finance FB should choose to fund the 11 change of production method. Justify your recommendation. Knowledge and Marks Analysis and Marks Application (4 marks) Evaluation (7 marks) A justified 7 recommendation for FB’s chosen source of finance in context A recommendation for 6 FB’s chosen source of finance in context An evaluation 5 statement of one source of finance in context Understanding of 4 Two-sided argument 4 venture capital and a based on the use of bank loan in context venture capital or a bank loan in context Understanding of 3 One-sided argument 3 venture capital or based on the use of understanding of a venture capital or a bank loan in context bank loan in context Knowledge of two 2 Limited analysis two 2 sources of finance sources of finance Knowledge of one 1 Limited analysis of one 1 source of finance source of finance No creditable content 0 Note: annotate one-side of the argument in the left-hand margin and the other side in the right-hand margin. Knowledge: Internal sources of finance: • retained earnings, sale of unwanted assets, sale and leaseback of non-current assets, working capital. External sources of finance: • share capital, new partners, venture capital, overdrafts, leasing, hire purchase, bank loans, mortgages, debentures, micro-finance, crowd funding and government grants. 2(d) Application: Source 1 (venture capital): • 10% ownership of FB for $1m – values the business at $10m. • She wants to be part of the decision-making at FB. • Experience of growing business in country Q. Source 2 (bank loan): • High interest rate. • Bank manager worried that demand may decline in the future. • Needs to be repaid within a year. Analysis: Source 1 (venture capital): • Lower profit/dividend for Bill and Sanjay – however revenue and GPM is growing. • VC may disagree with Bill and Sanjay – however her experience may be beneficial. • VC knows how to grow a business – however she may not have any knowledge of the specific market. Source 2 (bank loan): • Increased business costs (interest) – however no loss of ownership. • Speed of repayment may affect business operations/growth – however reduces the interest to be paid. • May increase risk of business – however no impact on Bill and Sanjay’s decision making. Evaluation: • A judgement/recommendation over which source should be chosen • Evaluation of the most important factors in the decision. • Evaluation of what other information the decision may depend upon; market expectations, external influences etc. Other appropriate responses should be credited.

Question 20

Hot Bubblez (HB) Karen is a sole trader who operates a service business called Hot Bubblez (HB) from her own home. It is a laundry service …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘service’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content An intangible product/process (1) which is offered to / paid for by customers (1). An action (1) sold by business (1). A correct definition will include the following points: • something sold by a business / bought by a customer / to satisfy needs or wants • an idea of intangibility. Exemplar Marks Rationale Something a customer buys which 2 Both elements cannot be touched. covered A process sold by a business. 2 Both elements covered An intangible product. 1 One element Something sold by a business. 1 One element A tertiary business 0 Not a definition of a service. 1(a)(ii) Explain the term ‘sole trader’ (line 1). 3 Award one mark for each point of explanation: B One mark for each of the following (up to a maximum of 1–2 two marks): marks • unlimited liability • shared legal identity with business • no continuity • no requirement to produce or make available accounts • no shares/shareholders • unincorporated • likely to be a small business • the owner keeps all the profits or bears the losses • has all the risk • has full control • makes all decisions themselves • example of a sole trader. A One individual or one person (must be a clear idea of a 1 mark single person) Exemplar Rationale Marks A sole trader is owned by one All three elements 3 person (A) who has unlimited liability (B) and does not need to publish financial accounts (B). Owned and controlled by one All three elements 3 person who bears the risk. A sole trader is owned by a A and B 2 single person (A) and does not have shareholders (B) A one person business (A) One mark only 1 A business where there is B only, which cannot be 0 unlimited liability (B), no need to awarded without the A mark. produce financial accounts, no continuity and no shareholders. Owned business. Tautology 0 ARA 1(b)(i) Refer to Fig 1.1 and any other relevant information. Calculate HB’s 4 share of the laundry service market. Rationale Marks Correct answer with or without correct working or units. 4 Attempt using some of the correct figures. 3 Formula* and identification of correct numbers 2 (i.e. 20% of 60 000). Formula* or identification of correct numbers 1 (i.e. 20% of 60 000). No creditable content. 0 Content Current share of the market Formula − × 100 Total market size Total market = 60 000 households Percentage who use a laundry service = 20% 20% of 60 000 = 12 000 households 300 households × 100 = 2.5% 12000 households Answer = 2.5% (allow 2.5) OFR 1(b)(ii) Analyse two factors which could affect the scale of HB. 8 Level Knowledge and Marks Marks Analysis (4 Application (4 marks) marks) 2b Shows 4 Good analysis of 4 understanding of two factors two factors which could which could APP affect the scale DEV affect the scale + of a business in + of a business in context context APP DEV 2a Shows 3 Good analysis of 3 understanding of one factor which one factor which could affect the could affect the scale of a scale of a business in business in context context APP DEV 1b Shows 2 Limited analysis 2 knowledge of of two factors two factors which could which could affect the scale AN affect the scale K of a business + of a business +K AN 1a Shows 1 Limited analysis 1 knowledge of of one factor one factor which which could could affect the affect the scale scale of a of a business business K AN 0 No creditable content Content Factors affecting scale are about the ability of a business to supply products, not the demand of the market. These factors are likely to involve: • Capital – the quantity and quality of the capital items in a business, such as machinery – this can include human capital. • Labour – the quantity and quality of the workforce. • Enterprise – the ability and willingness of an entrepreneur to take risks, find business opportunities. • Land – the quantity and quality of natural resources available to the business 1(b)(ii) Context may include: • Karen is a sole trader – limited availability of finance to purchase washing machines, irons etc. • Machinery – Karen only owns two washing machines, two dryers and one iron • The use of washing machine / dryer / iron – affects the batch size of washing • The use of batch production • The time HB takes to do a load of washing (two hours) • The transport used by Karen (van) and the amount of laundry she can carry • Karen as an entrepreneur • The new worker Analysis may include: • The impact this factor may have on the scale of HB • The factor may (or have the potential to) increase HB’s scale • The factor may (or have the potential to) decrease HB’s scale Development of this affect may be on HB’s revenue, costs and/or profit or another likely objective of HB, such as expansion or the industrial market. 1(c) Explain one appropriate method of recruitment for Karen to find a new 2 employee to do collections and deliveries. Level Knowledge and Application Marks 2 (APP) Explanation of an appropriate method of 2 recruitment in context 1 (K) Identification of a method of recruitment 1 0 No creditable content 0 Methods may include: • Internal recruitment (unlikely to be contextual) • External recruitment • Job advertisements • Job centre • Local online job websites • Recruitment agencies • Personal recommendations • Social media • Direct recruitment Context may include: • Requires travel around local area/town. • HB operates from Karen’s home. • Laundry market. • No other workers currently in business. • No specialist qualifications required (maybe driving licence). • Knowledge of local area • HB is a small business (sole trader). ARA 1(d) Evaluate appropriate promotion methods for HB to target the hotel 11 laundry market. Knowledge and Analysis and Application (4 Marks Evaluation Marks marks) (7 marks) Annotation Annotation Justified evaluation + + based on 7 EVAL arguments in EVAL EVAL context Developed + evaluation based 6 EVAL on arguments in EVAL context An evaluative statement based 5 on arguments in EVAL context Shows APP Arguments based DEV understanding of + + 4 on two promotion 4 two promotion methods in context APP methods in context DEV Shows Argument based understanding of 3 APP on one promotion 3 DEV one promotion method in context method in context K Limited analysis of AN Knowledge of two + + 2 two promotion 2 promotion methods K methods AN Shows knowledge Limited analysis of of one promotion 1 K one promotion 1 AN method method No creditable content 0 Content Knowledge may include: • Above the line; advertising (TV, radio, newspaper, etc.) • Below the line; direct promotion, website, leaflets, etc. • Through the line; social media, viral promotion, etc. • Informational and persuasive methods 1(d) Context may include: • Lack of finance, due to being a sole trader • Small business • Hotel/industrial market (B2B) • Data from Table 1.1 - 14 hotels in town P - 45 hotels within 30 mile of HB - 50 per cent of hotels have own laundry service (7 hotels in town P, 22/23 within 30 miles, 29/30 hotels in total) Analysis may include: • Local advertising – appropriate to target the hotel industry – e.g. hotel trade publications, possibly local radio, billboards. • Sponsorship – unlikely to be targeted enough to the hotel market. • Public relations – could be targeted towards the hotel market if the articles/reports are in hotel related publications/programmes. • Personal selling – a sensible approach that has limited cost (for a small business such as HB) and could be done by Karen visiting local hotels to sell her service. Could also be done by a salesperson hired by Karen, possibly on commission only payment. • Direct marketing – again a sensible solution that keeps it under Karen’s control. Can be done with a limited budget and Karen can target the hotels in the local area. • Sales promotion – unlikely to help HB enter the new market alone, but in combination with other informative methods may be a sensible approach to allow Karen to penetrate this new market. • Promotional price – do not reward use of price, but promotional pricing such as BOGOF, discounts sales promotions are rewardable. Evaluation may include: • A judgement over the most appropriate promotion method for HB • Evaluation of the appropriateness of different promotion methods for HB • What the choice of promotion method may depend upon ARA 1(d) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Personal Karen could This should This might Personal selling (K) visit each allow Karen make the selling is hotel which to explain all hotels more likely to be a does not the willing to better have its own advantages use HB’s promotion laundry of her service. method than service. service and (DEV) direct mail. (APP) answer the (EVAL) managers questions. This is (AN) because Karen can Direct Karen could A relatively But it may explain the marketing send details low cost be seen as USP of HB (K) of her method junk mail and try to service to because and ignored convince the the 14 there are by the hotel to use hotels in only 14 hotels, so her service. town P. hotels. (AN) HB will not (EVAL) (APP) gain any new However, it customers. depends on (DEV) whether Karen is a good salesperson. If she is not good at selling her service, then it could be a waste of time and money. (EVAL)

Question 21

Apple Farm (AF) AF is owned by Desi. Desi is a sole trader. AF specialises in growing and packaging apples which the business sells to a su…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘fixed costs’ (line 5). 2 Level Knowledge and Application Marks 2 A correct definition 2 1 A partial, vague or unfocused definition 1 0 No creditable content 0 Costs which do not vary as output changes (in the very short run). A correct definition should include the following elements: • costs do not change • as output changes. Exemplar Rationale Marks Fixed costs stay the same Both elements 2 when the business produces more or less. Fixed costs always stay the One element 1 same. When output changes fixed One element and a tautology. 1 costs remain fixed. Fixed costs stay fixed. Tautology 0 ARA 1(a)(ii) Briefly explain the term ‘sole trader’ (line 1). 3 Knowledge Marks Understanding of another element of a sole trader, such as: 1–2 • unlimited liability • shared legal identity with business • no continuity • no requirement to produce or make available accounts • no shares/shareholders • unincorporated • likely to be a small business • the owner keeps all the profits or bears the losses/risk • the owner has full control • makes all decisions themselves • Example of a sole trader. Understanding of a that a sole trader is owned by one person. 1 A business in which one person has unlimited liability and, in return, has full control of the business and keeps all the profits. Exemplar Rationale Marks A sole trader is owned by one All three elements 3 person (A) who has unlimited liability (B) and does not need to publish financial accounts (C). A sole trader is owned by a A and B 2 single person (A) and does not have shareholders (B) A business where there is B only. There must be 1 unlimited liability (B), no need understanding that there is to produce financial accounts, only one owner to gain the A no continuity and no mark. shareholders. Solely owned business. Tautology 0 ARA 1(b)(i) Calculate the break-even output for packs of apples sold by AF. 3 Rationale Marks Correct answer with or without correct working or units 3 Correct calculation of contribution per unit (must be backed up 2 with working) Formula 1 No creditable content 0 Price – $1 per pack VC – $0.50 per pack FC – $5000 Formula: Fixed Costs Contribution per unit Contribution per unit = Price – Variable costs (per unit) = $1 – $0.50 = $0.50 $5000 = 10 000 packs $0.50 1(b)(ii) Explain one possible use of break-even analysis to Desi. 3 Level Knowledge and Application Marks 2 Explanation of way a business can use break-even 3 (APP) analysis/data in context 1b Explanation of way a business can use break-even 2 (K+K) analysis/data 1a Identification of way a business can use break-even 1 (K) analysis/data 0 No creditable content 0 Knowledge may include: • To plan future production • To model ‘what if’ scenarios (change in price and cost) • To make business decisions about production • To discover the margin of safety • To target a level of profit Application may include: • Only one customer – supermarket (B2B) • Specialises in one type of apple – may make BE analysis more useful • Use of numbers (including OFR from Q1bi) • Decision about future production of apple juice (for example, new machinery cost, modelling costs of organic ingredients, model packaging costs, etc.) ARA 1(c) Analyse one advantage and one disadvantage to AF of leasing the new 8 machinery for producing apple juice. Knowledge and Level Application Marks Analysis (4 marks) Marks (4 marks) 2 Good analysis of one advantage and one disadvantage of 4 leasing as a source Shows of finance in context understanding of 3–4 leasing as source of Good analysis of finance in context one advantage or one disadvantage of 3 leasing as a source of finance in context 1 Limited analysis of one advantage and one disadvantage of 2 leasing as a source Shows knowledge of finance of leasing as a 1–2 source of finance Limited analysis of one advantage or one disadvantage of 1 leasing as a source of finance 0 No creditable content Advantages may include: • Cheaper option in the short term – therefore less risk if the apple juice is not successful • Maintenance is likely to be covered by leasing agreement, so lower costs • Desi may be able to update the machine on a regular basis for no extra purchasing cost. Disadvantages may include: • More expensive option in the long run (after 2½ years it will be more expensive) • Machinery would not be an asset to the business – only a cost • No resale value if the apple juice is not successful - Desi might be stuck with a contract to make lease payments for a year or more, whereas if he bought the machinery he might be able to sell it on for a small loss. ARA 1(d) Evaluate the importance of appropriate packaging for the new apple 11 juice. Analysis and Knowledge and Marks Evaluation Marks Application (4 marks) (7 marks) Justified evaluation about the importance of appropriate packaging 7 based on arguments in context Developed evaluation about the importance of appropriate packaging 6 based on arguments in context An evaluative statement about the importance of appropriate packaging 5 based on arguments in context Two arguments based on appropriate 4 Shows understanding of packaging in context the role of packaging in 3–4 context One argument based on appropriate packaging in 3 context Two pieces of limited analysis of appropriate 2 packaging Shows knowledge of the 1–2 role of packaging One piece of limited analysis of appropriate 1 packaging No creditable content Knowledge may include: • Packaging as a marketing tool; USP, promotion, product description etc. • Packaging as an operations tool (i.e. fit for purpose); quality, reduce damage etc. • Packaging as part of logistics; transportation, storage, etc. 1(d) Application may include: • Edible product, relatively short shelf-life • Objective to create product differentiation • Organic product with no added chemicals • Supermarket insisting on strength of packaging for transportation • Sold in multiple branches of the supermarket. Arguments may include: • Important to promote the product, especially as it is a new product to the market. • Important to promote the USP of the product as being organic and no added chemicals and preservatives • Important to make sure the product is protected in transport – will Desi be responsible for any wastage? • There may be legal requirements to put certain information on the packaging However: • There may be more important aspects to the product, such as taste and placement in the supermarket – will the packaging matter if the product is not on show enough • Is the packaging more about function than promotion – will consumers care if the outside looks good? Evaluation may include: • A judgement over the level of importance of appropriate packaging (compared to other issues) • A judgement over which argument is most important when considering the appropriate packaging • An evaluation of the level of importance • What the judgement/evaluation might depend upon. ARA

Question 22

Auto Bike (AB) AB is a private limited company that repairs and maintains motorbikes. AB has nine garages in country J and employs eight hi…

Accepted Answer

2(a)(i) Define the term ‘objective’ (line 13). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Indicative content AO1 Knowledge and understanding • Specific and measurable goals which a business sets out to achieve. A correct definition should include: • an idea that an objective is an aim/goal/target (allow any similar term) • that a business (or a stakeholder) wants to achieve/reach/obtain (allow any similar term). Exemplar Marks Rationale The aims that a business wants to 2 Both elements achieve covered The targets a business wants to reach 2 Both elements covered What an owner is aiming to do 2 Both elements The long-term aims which can be about 1 One element – there profit, sales, or CSR is no idea that a business is trying to achieve them What a business wants to achieve 1 One element – no idea of an aim Objectives are the business objectives 0 Tautology that a business has ARA 2(a)(ii) Explain the term ‘private limited company’ (line 1). 3 Award one mark for each point of explanation: Rationale Marks C Application of a private limited company to an 1 example or some other way of showing good understanding B Understanding of a feature unique to a private 1 limited company A Understanding of feature(s) of a company 1 Must have A and B marks before awarding the C mark. Indicative content AO1 Knowledge and understanding Features of a company including: • an incorporated business • shares can be sold/owners are shareholders • limited liability • separate legal identity • continuity • must make accounts available to everyone Features unique to a private limited company including: • cannot sell shares on a public stock exchange • do not need to publish accounts (just make available) • may only be sold to family and/or friends AO2 Application Application of a private limited company, such as: • an example of a private limited company, such as Jaguar, Lifestyle International, etc. (Do not reward repetition from the data, i.e. ‘AB is a private limited company’.) • application of how any of the K&U points might apply to a business, e.g. a private limited company not being able to sell shares on the stock market might restrict its ability to raise finance • application of further knowledge of a private limited company, such as continuity, legal personality, limited liability 2(a)(ii) Exemplar Marks Rationale A business with shares but they 3 All elements covered cannot be sold on the stock market. This limits their sources of finance A limited liability business that does 3 All elements covered not have to publish its accounts so the competitors cannot see them Sells shares but not on the stock 2 A and B marks only exchange A company which can sell shares has 1 Only the A mark limited liability and is incorporated (many times) AB is a private limited company 0 No K&U, just repetition from the data AB is privately owned 0 Confusion with a private sector business ARA 2(b)(i) Calculate the profit made from selling standard and advanced services 3 in April. Rationale Marks Correct answer(s) with or without correct working or $ 3 • Correct calculation of total revenue and total costs for both 2 services • Correct calculation of the total profit of standard or advanced services • Correct calculation of the profit from one standard and one advanced service • Formula 1 • Correct calculation of one total revenue or one total cost figure • Correct calculation of the profit from one advanced or one standard service No creditable content 0 Indicative content Formula: revenue – total costs or (price – total costs per unit) x quantity Standard services Advanced services $250 – ($50 + $60) = $140 (profit $400 – ($60 + $100) = $240 (profit from one standard service) from one advanced service) $140 × 1000 = $140 000 (profit $240 × 200 = $48 000 (profit from from all standard services) all advanced services) 1000 × $250 = $250 000 (total 200 × $400 = $80 000 (total revenue from standard services) revenue from advanced services) ($50 + $60) × 1000 = $110 000 ($60 + $100) × 200 = $32 000 (total (total cost of standard services) cost of advanced services) $250 000 – $110 000 = $140 000 $80 000 – $32 000 = $48 000 (total (profit from all standard services) profit from all advanced services) $140 000 + $48 000 = $188 000 (total profit from all services) $188 000 (3 marks) or $140 000 and $48 000 (3 marks) 2(b)(i) Common incorrect answers Answer Mark Rationale 188 000 (no working) 3 A correct answer, $ not required 140 000 and 48 000 3 A correct answer, $ not required 140 000 2 The calculation of only standard services profit, $ not required 48 000 2 The calculation of only standard services profit, $ not required $140 + $240 = $380 2 Correct calculation of profit from one standard and one advanced service 1000 × $250 = 1 Only calculation of total revenue, needs $250 000 total costs for 2 marks 200 × $400 = $80 000 $250 000 + $80 000 = $330 000 $110 000 + $32 000 1 Only calculation of total costs, needs = $142 000 total revenue for 2 marks $550 (no working) 0 Only the revenue from one standard and one advanced service, not the total. Also no working to back this up 2(b)(ii) Explain one possible problem for AB of trying to allocate indirect 3 costs. Level Knowledge and Application Marks 2b (APP+ Explanation of one possible problem of allocating 3 APP) indirect costs in context 2a (APP) Identification of one possible problem of allocating 2 indirect costs in context 1a (K) Knowledge of one possible problem of allocating 1 indirect costs 0 No creditable content 0 Although the definition of an indirect cost (a cost that cannot be attributed to a production process) is not rewardable, it contains a problem, so will usually gain a K mark. Indicative content AO1 Knowledge and understanding Knowledge of problems of allocating indirect costs may include: • not attributable to the production process • not attributable to a specific product/service • how to split costs such as marketing, administration, expenses when they are not directly linked to a costs centre AO2 Application • The attributed indirect cost of an advanced service is $40 more than a standard service (APP) – this may not reflect the difference in marketing/admin/expenses (APP+APP). • It may be difficult to allocate costs to the different types of service (APP) – because some garages may be busier than others (APP+APP). • The allocation is fixed, even though the garage sells five times more standard services than advanced (APP). If a garage does more/fewer services, then the contribution should vary (APP+APP). • Marketing for the different services may be through the AB brand (APP) – but the allocation does not reflect this (APP+APP). • The two services have different allocated indirect costs (APP) – $60 for a standard service and $100 for an advanced service (APP+APP) – however, there is no reason given for the difference (APP+APP). Application (APP) is likely to come from the context, with developed application (APP+APP) from further use of that context. 2(b)(ii) Example of how responses should be marked. Knowledge of Application Developed problem of allocating (APP – 2 marks) application indirect costs (APP+APP – 3 (K – 1 mark) marks) It may be difficult to The standard service But it may take as know the true level of only has an allocation much administration indirect cost that of $60 as the advanced should be allocated to service each product Each service will be But the advanced And this might make sold using the same service is allocated the advanced service branding which is part $40 more in indirect seem less profitable of the indirect costs costs ARA 2(c) Analyse two below the line promotion methods that AB could use to 8 increase the sales of advanced services. Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Applies promotion 4 Good analysis of 4 to two below the two below the line line promotion promotion methods methods in context 2a Applies context to 3 Good analysis of 3 one below the line one below the line promotion method promotion method in context 1b Shows knowledge 2 Limited analysis of 2 of two below the two below the line line promotion promotion methods methods 1a Shows knowledge 1 Limited analysis of 1 of one below the one below the line line promotion promotion method method 0 No creditable content Annotate marks for the first method in the left-hand margin and marks for the second method in the right-hand margin. Indicative content AO1 Knowledge and understanding Knowledge of below the line promotion methods, including: • Sales promotion; allow promotional pricing (i.e. BOGOF), but not just pricing • Direct marketing and direct mail, e.g. flyers • Public relations • Sponsorship • Personal selling • Branding and merchandising • Telemarketing • Trade fairs and exhibitions • Social media • Using own website (not a third party) • Word of mouth 2(c) AO2 Application • AB repairs and maintains motorcycles • Nine garages • Highly qualified mechanics • Two types of service: standard and advanced • May be possible to ‘upsell’ from standard to advanced services • AB sells five times as many standard services compared to advanced services • Higher profit margin for advanced services AO3 Analysis • Sales promotion: no outlay required (AN) – may focus on upselling from standard services to advanced, meeting the objective of increasing advanced sales (DEV) – however, may reduce sales of standard services (DEV). • Direct marketing and direct mail: can be focussed on customers who may have purchased services from AB in the past which can increase the chance of targeting the right customers (AN) – reduces the cost of promotion, increasing profits (DEV). • Public relations (PR): articles about AB in local newspapers may target the local market which increases the chances of successful promotion (AN) – however, there is no guarantee that the articles will show AB in a positive light (DEV). • Sponsorship: of local/national sports teams close to branches of AB may link AB to a successful team leading to increased sales (AN) – however, if the team does badly then AB may suffer from being associated with the team, leading to decreased sales (DEV). • Personal selling: upselling advanced services increases sales of a more profitable service (AN) – which could lead to a higher average profit margin and increased total profit (DEV). • Branding and merchandising: toys of motorbikes branded with AB, pens, etc., may get passed around and be seen by a large number of people (AN) – however, there may be a large initial cost with no guarantee of success (DEV). • Packaging: AB may be able to put stickers on motorcycles which have been serviced by AB and which could be seen by many potential customers (AN) – however, owners may not want to have the stickers, meaning they throw them away, wasting the money spent to produce them (DEV). • Telemarketing: direct calling of potential/existing customers of AB may increase sales (AN) – however, the cost is likely to be high and may not be targeted on the right market, wasting time and money (DEV). • Trade fairs and exhibitions: may allow AB to team up with other local businesses (for example, tyre garages) leading to cross promotion of the services (AN) – increasing sales of all services with minimal cost (DEV). 2(c) Examples of how an answer could develop and how it should be annotated. K APP AN DEV Sponsorship (K) Of a sports team This could lead However, AB that competes to the may have to pay near one of AB’s supporters of a large amount nine garages the team seeing to sponsor the (APP) the AB brand team and the every week audience may when their team not have a plays, motorcycle, increasing sales leading to a for AB (AN) waste of AB’s marketing budget (DEV) Direct mail (K) AB could send These previous And since many emails to all of customers are vehicles need a their previous likely to yearly service, it customers purchase may build up a because they services from loyal customer know that they AB, increasing base who repeat are most likely sales (AN) purchase from to own a AB often (DEV) motorcycle (APP) ARA 2(d) Recommend a new payment method for the mechanics at AB. Justify 11 your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified evaluation based 7 on argument in context Developed evaluation 6 based on argument in context An evaluative statement 5 based on argument in context Applies two pieces of 4 Argument based on two 4 context to impacts of payment understanding of a new method(s) in context payment method(s) Applies one piece of 3 Argument based on one 3 context to impact of payment understanding of a new method(s) in context payment method(s) Shows two pieces of 2 Limited analysis of two 2 knowledge about a new impacts of payment payment method(s) method(s) Shows one piece of 1 Limited analysis of one 1 knowledge about a new impact of payment payment method(s) method(s) No creditable content Do not reward time-based payment methods as these are repetition of the case and not a new method. Candidates can gain all the marks from one payment method or more than one method. 2(d) Indicative content AO1 Knowledge and understanding Knowledge of payment methods, including: • Salary – a set payment for the completion of a set of tasks. Does not vary based on time/output. • Piece rates – payment per item of output. • Commission – a reward for sales, usually as a percentage of sales/profit. • Bonuses – a payment to reward the best employees. • Profit sharing – a reward based on the level of profit to link employee pay to success of the business. • Performance related pay – linking the business/employee performance to the amount paid. AO2 Application • AB repairs and maintains motorcycles • Nine garages • Highly qualified mechanics • Two types of service: standard and advanced • Higher profit margin for advanced services • Motivation of the mechanics is low • Mechanics believe that they are not paid well • Working conditions are dirty and noisy • Currently use time-based payment based on hours worked • Some mechanics believe current pay system rewards lazy workers • Current pay does not take into account level of difficulty of different jobs. AO3 Analysis Analysis of leasing may include: • Salary: could be varied for each employee based on experience/skill, increasing motivation of those who have higher skills (AN) – however, likely to be seen as unfair as current method and therefore increasing cost with no increase in revenue (DEV). • Piece rates: may reward speed increasing the number of services that AB can perform and increase revenue (AN) – but could reduce quality which may ruin AB’s reputation which is important for a service (DEV). • Commission: may reward sales and encourage the upselling of standard to advanced service, increasing the profit of AB (AN) – however, since services seem to have a fixed price this again would not reward complexity or quality of work, demotivating the mechanics (DEV). • Bonuses: could be used to reward harder work/skill increasing the number of and/or quality of AB’s services and increasing revenue (AN) – but may be divisive amongst workforce leading to more demotivation and a lack of quantity or quality (DEV). • Profit sharing: may be used to reward hardest worker/those with greater skill, motivating the mechanics to produce more (AN) – however, may not account for how much each worker really contributes to the overall profit (DEV). • Performance related pay: may reward hardest workers leading to increased sales (AN) – but might not reward the complexity of the task, in which case it may demotivate and be seen as unfair (DEV). 2(d) AO4 Evaluation • A recommendation about a new payment method for the mechanics at AB. • A judgement over the relative suitability of the chosen payment method. • Elements that the recommendation/judgement could depend upon, including: the AB’s budget, AB’s profitability, the expected increase in sales from a motivated workforce, the profit margin of each of the types of services, the reaction of the mechanics, the payment system/level at similar businesses (competitors). • Weighing up of the impacts on the mechanics and AB of the recommended new payment method. • Weighing up of the likely advantages/disadvantages of the new payment system against the advantages/disadvantages of the current (time-based) system. Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL AB could This would This will This means A piece rate pay their mean reward the that AB can system of mechanics paying mechanics sell more payment may be using a them for who work services a suitable piece rate each hardest leading to replacement for (K) service because increased AB’s time-based they they will profit system (EVAL). complete earn more (DEV) This is because it on a and overcomes one motorcycle increase of the mechanics’ (APP) the biggest concerns capacity of that lazy workers AB (AN) are currently rewarded the However, And a If the This will same as those piece rate service services damage who work hard rewards business are rushed, AB’s (EVAL). quantity not like AB then reputation However, its quality (K) needs a customers and could suitability good might start lead to a depends on reputation to complain significant whether AB can so that and seek loss of ensure the customers their sales and mechanics do feel their money profit not cut corners motorcycle back (AN) (DEV) and give poor is safe quality services (APP) (EVAL) ARA

Question 23

Van Man (VM) Obi is a sole trader who operates a van service. He used to be employed by a similar business but realised that he likes to be…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘sole trader’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Must be distinct from other ownership types Indicative content AO1 Knowledge and understanding • A business in which one person provides the finance and in return has full control of the business and keeps all the profits. • An only trader has all the risk / unlimited liability. • An only trader pays income tax. Exemplar Marks Rationale A person who invests all the capital and 2 Correct definition has unlimited liability The only owner of the business who 2 Correct definition invests all the capital The only owner of the business/owns a 1 Partial knowledge business by themselves A person who owns the business 1 Partial definition The owner of a business 1 Implied ‘only’ An owner operator 1 Implies a single person Finance may be limited 0 Limited for all business structures ARA 1(a)(ii) Explain the difference, for a business, between price and cost. 3 Award one mark for each point of explanation: Rationale Marks Understanding of the difference between a price and a cost 1 Understanding of a cost 1 Understanding of a price 1 Indicative content AO1 Knowledge and understanding • A price is an amount paid by a customer / the amount a business sells/charges for its product/service. • A cost is an amount paid by a business / to a supplier. • A cost is the amount of money used to produce the goods/service. AO2 Application Application of the difference between a price and a cost, such as: • Businesses receive the value of a price (from the customer) but pay the value of a cost (to a supplier). • The difference between price and cost is profit. 1(a)(ii) Knowledge of a price and a cost may be assumed from application. Exemplar Mark Rationale Price is more than its cost 3 The simplest form of answer The mark-up/the profit margin/profit 3 Simplest form of answer A price is the amount paid by a 3 All three elements customer, a cost is the amount paid for clear raw materials used in the manufacture and the difference is the profit made. A cost is the amount the raw materials 3 All three elements cost, whereas the price is the amount a clear business charges its customers for the finished product. Cost is the expenses incurred in making 3 All three elements a product, whereas price includes the clear profit set by the seller. Cost is the expenses incurred in making 2 No difference shown a product. Price is the amount a business charges its customers for the finished product. ARA 1(b)(i) Calculate the profit that Obi will make from a customer who hires two 3 vans for three days. Rationale Marks Correct answer with or without correct working or $ 3 Correct calculation of TR and TC 2 Formula or correct calculation of TR or correct calculation of 1 TC No creditable content 0 Indicative content (Total) revenue – (Total) cost = profit Total revenue = ($250 + $225 + $225) × 2 = $1400 Total cost = ($170 + $170 + $170) × 2 = $1020 $1400 – $1020 = $380 Profit = $380 OFR If candidates continue to discount 10% beyond the second day, then award as a correct answer. Common incorrect answers Answer Marks Rationale $330 3 Continued use of 10% discount $190 2 Only calculated one van – incorrect final answer but correct formulae implied by use of figures $165 2 Only calculated one van – incorrect final answer but correct formulae implied by use of figures 1(b)(ii) Explain one factor which may affect the demand for Obi’s services. 3 Level Knowledge and Application Marks 2b Explanation of one factor in context 3 (APP+APP) 2a (APP) Identification of one factor in context 2 1a (K) Identification of one factor 1 0 No creditable content 0 Indicative content AO1 Knowledge and understanding Knowledge of a factor affecting demand may include: • (perceived) waiting/lead time • (perceived) price • population • income level • consumer tastes and preferences • level of competition • advertising AO2 Application • Price – Obi charges $250 – how do Obi’s prices compare with competition? • Population – direct correlation between number of people wanting to move and the population – Obi’s service is likely to be required more often if it is located in an area with a high population. • Income levels – higher income likely to move household/bulky items more often – and use a service as opposed to doing it themselves. • Consumer tastes and preferences – service based so potential customers will look for reviews – Obi might have good reviews of his service from past customers. • Level of competition in the local/national market – Obi used to be employed by a similar business – therefore some competition. • Advertising – a service sector business and likely to be competitive – customers need to know about the service to book it. 1(b)(ii) Application (APP) is likely to come from the context, with developed application (APP+APP) from further use of that context. Example of how responses should be marked. Identification of a Application Developed application way (APP – 2 marks) (APP + APP – 3 marks) (K – 1 mark) Competition from the other who may reduce prices to business he was attract Obi’s customers employed by Income level is $250 per day too expensive ARA 1(c) Recommend whether Obi should purchase Van A or Van B. Justify your 11 recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified recommendation 7 based on argument(s) in context Developed recommendation 6 based on argument(s) in context An evaluative 5 statement/recommendation based on argument(s) in context Shows understanding 4 Argument based on Van A 4 of factor(s) affecting AND Van B in context Van A AND Van B in context Shows understanding 3 Argument based on Van A 3 of factor(s) affecting AND Van B in context Van A OR Van B in context Shows knowledge of 2 Limited analysis of Van A 2 two or more factors AND Van B affecting decision making Shows knowledge of 1 Limited analysis of Van A OR 1 one factor affecting Van B decision making No creditable content Arguments for Van A on one side and Van B on the other to show arguments for each Indicative content AO1 Knowledge and understanding Knowledge of factors affecting decision making, including: • cost(s) • timescale • revenue • utility 1(c) AO2 Application 11 Application may include: • sole trader • main business is based on the use of vans • already owns three vans • eight full-time employees • demand is growing fast • use of Table 1.2 AO3 Analysis Analysis of Van A may include: • lower purchase cost • higher maintenance costs • shorter lifespan • lower (slightly) insurance costs • high level of reliability • are other qualitative elements relevant? Analysis of Van B may include: • higher purchase cost • lower maintenance costs • longer lifespan • higher (slightly) insurance costs • possibly less reliable based on customer review • use of colours may provide an advertising benefit • speed of manufacturer response to break down is good • faster – may allow a speedier service (but could also have legal issues) • are other qualitative factors relevant? AO4 Evaluation • A recommendation about whether Ralph should choose Van A or Van B. • A judgement over the relative suitability of the vans. • Elements that the recommendation/judgement could depend upon, including availability of finance/amount of finance, how long Obi keeps his vans for on average, length of warranty, past reviews, whether he trusts his employees not to speed, fuel economy as a factor. • Weighing up of the relative impacts on Obi of the vans. 1(c) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Cost VAN A – Reduces Increases Should buy boring but direct costs profit margins Van A fuel efficient of petrol Because Lifespan1 VAN B – Capital cost Helps long- lower direct lasts 9 years spread over term costs more a longer time budgeting important than long- term budgeting Even though the image may be impacted ARA 1(d) Analyse two factors which may influence the source of finance that Obi 8 chooses for the new van. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding 4 Good analysis of two 4 of two factors which factors which may may influence the influence the source of source of finance in finance in context context 2a Shows understanding 3 Good analysis of one 3 of one factor which factor which may may influence the influence the source of source of finance in finance in context context 1b Shows knowledge of 2 Limited analysis of two 2 two factors which may factors which may influence the source of influence the source of finance finance 1a Shows knowledge of 1 Limited analysis of one 1 one factor which may factor which may influence the source of influence the source of finance finance 0 No creditable content Indicative content AO1 Knowledge and understanding Knowledge factors affecting sources of finance, including: • size/structure of business • cost of finance • costs of the business • flexibility • need to retain control • use of the finance • level of existing debt AO2 Application • Sole trader • Main business is based on the use of vans • Already owns three vans • Eight full-time employees • Demand is growing fast • Use of Table 1.2 – may be based on recommendation made in Q.1(c) AO3 Analysis • Speed of acceptance – requires a source of finance that will allow immediate purchase – capitalise on the increased demand – • Running costs – some sources of finance may allow this to be included (such as leasing or hire purchase) – reduces variable outgoings • Flexibility – Obi may need to repay over the lifetime of the van, or he may be able to reduce the cost of finance and repay earlier if demand remains high – can manage cashflow • Need to retain control – Obi likes to be in control so is unlikely to want a source of finance that means he loses control (such as taking a partner or selling shares) – • The use of the finance – acquiring a van – some sources of finance are more suited to longer term options (such as bank loans) or the acquisition of a capital item that loses value (such as leasing or hire-purchase) • Level of existing debt – Obi used his savings to set up VM so he has no debt – has to use external sources Examples of how an answer could develop and how it should be annotated. K APP AN DEV Cost of finance $30/40k loan Higher loan = Reduces larger cashflow/profits repayments Level of Savings used Means has to use Which may existing debt so no debt external sources involve loss of control ARA

Question 24

Farm Produce (FP) FP is a primary sector co-operative made up of six farms in country G. Each farm grows a range of fruit and vegetables. F…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘labour intensive’ (line 8). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content: Production based on a high level of employee input compared with capital equipment. A correct definition will include the following points:  use of a high number of employees/manual/workers  as opposed to a high level of capital (no/limited machinery involved) Exemplar Marks Rationale Using a higher proportion of 2 Both elements employees than capital. covered When something is made by people 2 Both elements instead of capital. covered A hand made product. 1 One element Where more labour than capital is 1 One element – used. ‘labour’ is a tautology. The intensity of the labour used. 0 A tautology. ARA 1(a)(ii) Explain the term ‘co-operative’ (line 1). 3 Award one mark for each point of explanation: C Example or some other way of showing good 1 mark understanding, e.g. bulk buying, common in agriculture, motivational, slow decision-making, allows the achievement of economies of scale, mutual benefit, types of co-operative (worker and customer) etc. B Knowledge of the operation of a co-operative: 1 mark  Responsibilities are shared  Owners may contribute to the running/operation/control of the business  Shared decision-making  All members have one vote  Profits are shared A Knowledge of the ownership of a co-operative: 1 mark  Owned / financed by workers / customers / members Note: Using the case as an example is repetition and not rewardable as the C mark A and B must be awarded before C mark can be given. Content: A co-operative is a business structure where the workers are the owners. The profits are shared with workers. Workers (owners) do not have to manage the business: they may vote for Directors. In smaller co-operatives, such as worker co-operatives, workers may also manage the business. Exemplar Mark Rationale Members (A) own a co-operative and 3 A, B and C share the running (B) of the business. Co-operatives can be slow when making decisions (C). A co-operative can be owned by 3 A, B and C customers or workers (A) who will each have a vote (B). Because they own it, they are motivated for it to do well (C). A co-operative has shared ownership 2 A and B by workers (A) and responsibilities (B) 1(a)(ii) Exemplar Mark Rationale Members (A) who join together to 1 A only – cannot benefit from bulk buying award C without both A and B A co-operative is made up of people 1 Three points but all who share the responsibilities of the from B, so only one business (B). Each person has a vote, mark. and the decision-making is shared. ARA 1(b)(i) Refer to Table 1.2. Calculate the profit made by FP in April 2022. 4 Rationale Marks Correct answer with or without correct working or $ 4 Three correct stages in calculation 3 Two correct stages in calculation 2 Formula (may be implied) or one correct stage in calculation 1 No creditable content 0 Method 1 Method 2 TR – TVC – TFC Small ($10  400) – ($8  400) – 400  $10 = $4000 $2000 300  $20 = $6000 = $4000 – $3200 – $2000 150  $35 = $5250 = -$1200 (1) TR = $15 250 (1) Medium ($20  300) – ($10  300) – 400  $8 = $3200 $2000 300  $10 = $3000 = $6000 – $3000 – $2000 = $1000 (1) 150  $15 = $2250 Large TVC = $8450 (1) ($35  150) – ($15  150) – $2000 + $2000 + $2000 = $2000 $6000 (1) = $5250 – $2250 – $2000 (TFC) = $1000 (1) –$1200 + $1000 + $1000 = $15 250 – $8450 – $6000 = $800 (1) $800 (1) Method 3 Answer = $800 (4) Small: $2  400 = $800 (1) Medium: $10  300 = $3000 (1) Large $20  150 = $3000 (1) Answer = $6800 – $6000 = $800 (1) 1(b)(i) Common incorrect answers Answer Mark Rationale 800 (with or without working) 4 Does not need $ TR=$15250 3 There is only one mistake. FC = $6000 The candidate has used VC VC = $8 + $10 + $5=$33 per box, not TVC. In all other ways this is correct, so 3 $15250 – $6000 – $33 = marks. $9217 $9217 (no working) 0 A wrong answer, without working is always 0 marks. $4000 – $3200 = $800 3 One mistake – only one (small) share of FC has been $6000 – $3000 = $3000 subtracted. In all other ways (medium) this is correct, so 3 marks. $5250 – $2250 = $3000 (large) $800 + $3000 + $3000 – $2000 =$4800 $4800 (no working) 0 A wrong answer, without working is always 0 marks. TR=$15250 3 There is only one mistake. FC = $6000 The candidate has multiplied VC = ($8  10) + $10  $20) the VC per box by the price, + ($15  35) = $805 not output. In all other ways this is correct, so 3 marks. $15250 – $6000 – $805 = $8445 TR = 15250 1 Although we can guess how Answer = $8445 the candidate got to this number, we do not know for sure. Only mark what is there, so this is only 1 mark (for correct calculation of TR). $8445 0 A wrong answer, without working is always 0 marks. 1(b)(ii) Explain one problem FP may have when deciding how to allocate fixed 2 costs to each box size. Level Knowledge and Application Marks 2 (APP) Explanation of one problem of allocating fixed 2 costs in context 1 (K) Identification of one problem of allocating fixed 1 costs 0 No creditable content 0 Content: Knowledge of problems of allocating fixed costs (FC):  Takes time to allocate the FCs  Takes money to allocate the FCs  Separation of FCs by the box sizes  Consequence of separation of the FCs, such as: – makes a product appear unprofitable – leads to a pricing mistake. Application may include:  Three box sizes  Same FC ($2000) for each box size  Different prices ($10, $20, $35) for each box size  Different variable cost ($8, $10, $15) for each box size  Different sales for each box size (400, 300, 150).  OFR from Q1(b)(i) – allow for wrong numbers if used incorrectly in Q1(b)(i). Note: correct use of any one figure is enough for APP. However, there must be a K to be able to award APP. ARA Exemplar Mark Rationale Fixed costs are difficult to 2 Problem of separation clearly separate based on each box identified and context used. size (K). FP has allocated the same fixed costs each box size (APP). 1(b)(ii) Exemplar Mark Rationale Each box has different fixed 2 Problem clearly identified and costs so it is difficult to context used. separate them (K). However, FP makes each pay a third (APP). FP makes each box pay the 2 APP cannot be awarded same allocation of fixed costs before K, but you can (and (APP), but each box size may should) go back to reward it have different overhead costs once K has been found. (K). It makes the small box look 2 The small box only looks unprofitable (K and APP). unprofitable because of the allocated fixed costs, so that is a problem, in context. 1(c) Analyse how two stakeholders of FP might be affected by the decision 8 to stop selling the small box size. Level Knowledge and Marks Analysis (4 Marks Application (4 marks) marks) 2b Shows 4 Good analysis of 4 understanding of the impact of the two stakeholders APP decision to stop DEV in context + selling the small + size on two APP box stakeholders of DEV FP 2a Shows 3 Good analysis of 3 understanding of the impact of the one stakeholder decision to stop in context selling the small APP DEV box size on one stakeholder of FP 1b Shows 2 Limited analysis 2 knowledge of two K of the impact of AN stakeholders + stopping selling a + K product on two AN stakeholders 1a Shows 1 Limited analysis 1 knowledge of of the impact of one stakeholder K stopping selling a AN product on one stakeholder 0 No creditable content Note: – annotate the first stakeholder in the left margin and the second stakeholder in the right margin. Indicative content AO1 Knowledge and understanding Knowledge of stakeholders may include:  Managers  Owners/shareholders/members  Employees  Customers/consumers  Suppliers  Local community  Government. 1(c) AO2 Application  Managers – of one of the farms  Owners – members of FP co-operative  Employees – 26 workers, workers in distribution centre, labour intensive  Customers/consumers – 400 boxes (weekly so may be 100 customers). May be individual (living on own) customers – highest sales, most in demand by customers.  Suppliers – of farm equipment and consumables  Competitors – who provide seasonal fruit and vegetables, such as other farms and supermarkets  Local community – around FP’s farms and/or distribution centre.  Government – of country G which promotes eating fruit and vegetables AO3 Analysis  Customers – will they have to move to competitors or pay for a larger box – increased price – less disposable income – lower quality of life  Owners/shareholders/members of FP co-operative – if customers move to competitors, then less sales revenue (fixed costs will need to be allocated across two box sizes not three) – lower profitability  Government – less tax revenue (or lower need for subsidies)  Competitors – customers may move from FP (assuming they sell a similar small box size) – decreased revenue – profit  Employees – possibility of less work through loss of sales or possibility of increased work through gain of sales revenue of larger boxes – effect on income and living standards.  Local community – as customers, but also may be affected by pollution (noise and air) from the transportation – fewer small boxes may mean less transportation – lower pollution. Examples of how an answer could develop and how it should be annotated. K APP AN DEV Customers might live on so may find it and leads to a their own, difficult to afford lower standard a bigger box, of living. Shareholders who are the will make which may members of the more/less profit* decrease/increa co-operative se their income. *The small box only looks unprofitable because of the allocation of fixed costs. It makes a positive contribution, so if FP stops selling it, the owners get less profit. Allow answers which state that the owners will make more or less profit ARA 1(d) Evaluate the most important factor affecting the supply of FP’s boxes 11 of fruit and vegetables to customers. Knowledge and Marks Analysis and Marks Application (4 Evaluation marks) (7 marks) Annotation Annotation Justified evaluation 7 EVAL based on arguments in context + EVAL + EVAL Developed 6 EVAL evaluation based on arguments in context + EVAL An evaluative 5 statement based on arguments in context EVAL Shows 4 Arguments based on 4 understanding of two APP two factor affecting DEV factors affecting + supply in context + supply in context APP DEV Shows 3 Argument based on 3 understanding of one factor affecting one factor affecting APP supply in context DEV supply in context Knowledge of two 2 Limited analysis of 2 factors affecting K two factors affecting AN supply +K supply + AN Shows knowledge of 1 Limited analysis of 1 one factor affecting one factor affecting K AN supply supply No creditable content 0 Note: this is a supply question – do not allow any factors which affect demand. 1(d) Knowledge may include:  Any factor affecting supply – price (accept as affecting quantity sold) – costs – indirect tax – subsidies (government grant) – legislation – capacity – weather – technology – productivity – factors of production o land o labour o capital o enterprise. Application may include:  Agriculture  Annual government grant  Minimum wage set to increase  26 workers across farms and distribution centre  Food products  Labour intensive production  Use of Table 1.1  Use of Table 1.2. Analysis may include:  Price: – an increase in price may lead FP to an increase in (quantity) supplied – gain more revenue and increase the profitability of the boxes. – A decrease in price may lead FP to a decrease in (quantity) supplied – gain less revenue and decrease the profitability of the boxes.  Costs: – increase may lead to lower quantity of boxes and/or increase in price – lower profit/profitability. – decrease may lead to high quantity of boxes and/or decrease in price – higher profit/profitability.  Indirect tax: – increase may lead to lower quantity of boxes and/or increase in price – lower profit/profitability. – decrease may lead to high quantity of boxes and/or decrease in price – higher profit/profitability.  Subsidies/grant: a subsidy to the farm is likely to increase the quantity of boxes FP produces and/or decrease the price of FP’s boxes – increased profit. 1(d)  Legislation: such as planning laws which could make it easier for FP to expand and increase production – increasing revue/profit.  Capacity: an increase in FP’s capacity is likely to lead to an increase in the quantity produced of FP’s boxes – increased sales and profit.  Weather: poor weather may adversely affect FP’s ability to produce fruit and vegetables reducing the contents of boxes – decreased revenue/profit.  Technology: more advanced production technology or advances in administration automation may reduce FP’s costs – increasing profitability.  Productivity: increased productivity may lead to an increase in supply – increasing FP’s revenue.  Labour availability: the more workers who are available the more FP can supply fruit and veg – increased profit. Evaluation may include:  A judgement over importance of factors affecting supply of FP’s products  Evaluation of the relative impact of different factors  Elements that the evaluation/judgement might depend upon: level of competition, current pay of workers, elasticity, complements, substitutes etc. ARA Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Weather Is likely to If the which Overall, the affect the weather is increases most important amount of good, FP the supply. factor is the fruit and will weather vegetables increase (EVAL) that FP can the number because FP grow. of products cannot plan for to sell it in advance (EVAL). Labour because This is Which However, this costs the likely to means that depends how minimum reduce the FP will much the wage is set supply of make less climate in to increase products revenue. country G is by 10%. likely to change each year (EVAL).

Question 25

Seaside Hotel (SH) SH is a large hotel located in a tourist area of country H. SH has 120 rooms and employs 42 workers during the peak (bus…

Accepted Answer

2(a)(i) Define the term ‘redundant’ (line 16). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content: An employee loses their job when a business no longer has the need for their job role. A correct definition will include the following points:  A form of dismissal e.g. they lose their job, ‘let go’ etc…  When the job role is no longer needed Exemplar Marks Rationale When an employee loses their 2 Both elements covered job because their role is no longer needed Redundancy is when a job is not 2 Both elements covered necessary and the worker is dismissed. When a contract is terminated 1 Only one element due to not being able to afford the wages. When an employee is dismissed 1 One element from a job. When something is no longer 1 One element – must be needed. an idea of losing a job or dismissal. When an employee is made 0 A tautology. redundant. ARA 2(a)(ii) Explain the term ‘joint venture’ (line 25). 3 Award one mark for each point of explanation: C Example or some other way of showing good 1 mark understanding, i.e. formal contract. To award C there must be understanding that this is not a merger (i.e. remain separate businesses). B Shared 1 mark risk/reward/facilities/staff/capital/knowledge/experience/ promotion etc… A Two or more businesses/parties agreeing to work 1 mark together Note: A joint venture is not a merger. Using the case as an example is repetition and not rewardable as the C mark A and B must be awarded before C mark can be given. Content: This is normally when two (or more) businesses agree to work together to share expertise/finance/rewards from a project. Example, two companies working together to create a new product. Will be formalised in a contractual agreement. Exemplar Mark Rationale A joint venture is when two business 3 Both elements come together to do a certain project. included and an They might share their resources. For example. example, if Nissan and Toyota worked together to make a new electric car. When more than one party work 3 Both elements and a together and they share the profits. way of showing This may require a contract to show good understanding who gets what. When two or more businesses come 2 Both elements BUT together, share the risk and reward. the example is An example is the joint venture of SH copied form the to use their restaurant facilities. data, so only two marks. 2(a)(ii) Exemplar Mark Rationale When two or more business work 1 One element – do together for example if Nissan and not award C mark if Toyota work together to produce a A and B not new electric car. awarded. When more than one party works 1 One element. together on a project. 2(b)(i) Refer to Table 2.2 and any other information. Calculate the average 2 margin of safety from April to September 2021. Rationale Marks Correct answer with or without correct working or units 2 Formula or correct calculation of current level of production 1 No creditable content 0 Content: Level of production – break-even level of production (120 / 100)  95 = 114 rooms (1) 114 rooms – 72 rooms = 42 (1) rooms (OFR) Answer = 42 rooms is the average margin of safety (2) accept 35% (must include % sign) Alternative route: BE level = 60% (1) Current level = 95% Margin of safety = 35% (2) Common incorrect answers Answer Mark Rationale 42 (no working) 2 ‘Rooms’ not needed. 35 (no working) 1 If candidate has used this method, then they must include % for both marks. 95% of 120 = 114 1 If there is a correct calculation of 120 – 114 = 6 rooms the current level of output, award 1 mark. 114 1 Correct calculation of current level 72 = 1.583 of output. 1.583 (no working) 0 You must be able to see the calculation of the current level of output to reward a mark, if the answer is wrong. 2(b)(i) Answer Mark Rationale Current production – 1 Correct margin of safety formula. BE level Current production = 1 The candidate miscalculated the 115 current level of production, but the 115 – 72 = 41 last stage is correct based on their own figure. So OFR and 1 mark. 2(b)(ii) Explain two possible limitations to SH of using break-even analysis. 4 Level Knowledge and Application Marks 2b Explanation of two limitations of using 4 (APP + APP) break-even analysis in context 2a (APP) Explanation of one limitation of using break- 3 even analysis in context 1b Knowledge of two limitations of using break- 2 (K + K) even analysis 1a (K) Knowledge of one limitation of using break- 1 even analysis 0 No creditable content 0 OFR may be based on calculation in Question 2(b)(i). One contextual limitation that is awarded K and APP must always gain 3 marks The answer must be a limitation of break-even, not a generic ‘inaccurate’ answer. Content:  Unrealistic assumptions – assumes each room is sold at the same price, unlikely for a seaside hotel  Assumes that the fixed costs are constant – such as the market costs when producing promotional materials for the hotel.  Assumes constant average variable costs – however 42 workers employed at peak season suggests that this is not true  Based on an average – may not be useful information about peak (busy/holiday) and off-peak times  Does not include any income from the joint venture with the restaurant.  Assumes all output will be sold ARA Exemplar Mark Rationale It assumes that variable costs 4 BE does assume remain constant (K), for example constant VC, and the the cleaning may be different for context of cleaning and each room (APP). It assumes the rooms. Second price is the same (K) for each room limitation is also correct (APP). and in context. 2(b)(ii) Exemplar Mark Rationale BE assumes the price does not 3 Clear limitation and change (K), which is wrong for a context. hotel (APP). Second limitation is not BE is also based on an estimate in context. (K) It is only based on an average (K) 3 Clear limitation and for peak season (APP). context. Based on estimates (K) 1 Clear limitation but no context May not be accurate, because it is 0 Not a specific limitation based on a hotel. of BE. 2(c) Analyse one possible advantage and one possible disadvantage to SH 8 of Tia’s autocratic leadership style. Level Knowledge Marks Analysis (4 Marks and marks) Application (4 marks) 2b Shows 4 Good analysis 4 knowledge of of one one advantage advantage and APP DEV and one one + + disadvantage disadvantage of autocratic of autocratic APP DEV leadership in leadership in context context 2a Shows 3 Good analysis 3 knowledge of of one one advantage advantage or disadvantage or APP onedisadvantage DEV of autocratic of autocratic leadership in leadership in context context 1b Shows 2 Limited 2 knowledge of analysis of one one advantage K advantage and AN and one + one + disadvantage K disadvantage AN of autocratic of autocratic leadership leadership 1a Shows 1 Limited 1 knowledge of analysis of one one advantage advantage or or K one AN disadvantage disadvantage of autocratic of autocratic leadership leadership 0 No creditable content Annotate advantage on the left and disadvantage on the right 2(c) Indicative content AO1 Knowledge and understanding Knowledge advantages of autocratic leadership style may include:  Speed of decision-making  Unambiguous objectives/commands  Clear chain of command  May increase productivity  Less need to train/skill employees Knowledge of disadvantages of autocratic leadership may include:  Lack of creativity  May cause demotivation  May stifle communication  Subordinates are unable to make any decisions AO2 Application  Tia is one of three managers at SH  Tia has responsibility for cleaners: – Areas must be cleaned to the required standards – Health and safety issues (chemical cleaners, use of cleaning equipment, etc.) – Coordination over 12 cleaners over 120 rooms – Half of the cleaners are temporary employees only employed during the peak season – Likely to be relatively low-skilled/pay  Tia also has responsibility for the Marketing employees: – Designing (creativity) of promotional materials – 7 marketing employees – Likely to be relatively high-skilled/pay  Most employees are likely to be customer facing in a hotel  Average of 95% capacity utilisation in peak season (busy hotel)  Objective to increase value added to the service that SH provides. AO3 Analysis Advantages may include:  Speed of decision-making: in peak season, Tia has a large span of control. Autocratic leadership may be a more efficient way of controlling and co-ordinating this number of employees – increased productivity and decreased costs.  Unambiguous objectives/commands: can ensure a standard level of quality ‘fit for purpose’, essential with cleaning – may help SH to achieve their objective of increasing value added, increase repeat customers.  Clear chain of command: enables the team to clean the 120 rooms efficiently – reduced costs, increased profitability.  May increase productivity: clear commands may allow the Marketing employees to produce standardised promotional material which is more likely to fit the image of SH – increased sales profit.  Less need to train/skill employees: new cleaners are recruited each year (in peak season) so an autocratic style is likely to be appropriate as they may only work for a few weeks/months and need to be trained and supervised quickly. 2(c) Disadvantages may include:  Lack of creativity: marketing employees are likely to need to be creative, especially with the cross advertising with the hotel. This will have a direct impact on sales – increased revenue and profit for SH.  May cause demotivation: especially for the marketing employees with reduced quality of marketing materials – poor sales/growth.  May stifle communication: Tia may not find out about problems in the hotel reduced quality – lower sales/profit.  Subordinates unable to make any decisions: 19 workers for Tia to manage – how can she be autocratic and directly supervise so many workers – might this lead to them only working hard when Tia is directly observing/supervising them – reduced productivity and increased costs. Examples of how an answer could develop and how it should be annotated. K APP AN DEV An advantage Which means This is likely to Increasing the could be that it that Tia can lead to better chance of is quick. make fast quality rooms repeat sales. decision about for customers. what cleaning needs to be done. However, it may in the marketing This is likely to reducing SH’s reduce department. lead to poor sales revenue. creativity quality promotions, 2(d) Recommend how SH can increase the value added to its service. 11 Justify your recommendation. Knowledge and Marks Analysis and Marks Application (4 Evaluation marks) (7 marks) Annotation Annotation Justified 7 EVAL recommendation based on arguments + EVAL in context + EVAL Developed 6 EVAL recommendation based on arguments + in context EVAL An evaluative 5 statement / recommendation EVAL based on arguments in context Shows 4 Argument based on 4 understanding of APP two ways of adding DEV two ways of adding + value in context + value in context APP DEV Shows 3 Argument based on 3 understanding of one way of adding one way of adding APP value in context DEV value in context Shows knowledge 2 Analysis of two ways 2 of two ways of K of adding value AN adding value +K + AN Shows knowledge 1 Analysis of one way 1 of one way of of adding value K AN adding value No creditable content 0 Note: the two ways may come from the same piece of knowledge (i.e. new facilities). 2(d) Indicative content AO1 Knowledge Knowledge of ways of adding value, including:  Branding  Advertising  USP  Additional services  Additional product benefits  Reducing cost  Increasing quality. Application may include:  Hotel – rooms  Customer service - guests  Cleaning  Promotional materials (SH branding)  Views of the sea  Local tourism  Does not currently have a restaurant  Joint venture with local restaurant Analysis may include:  Branding: common in the hotel industry, a brand name can increase the price of a room – increasing profit margin.  Advertising: to increase the number of customers who are aware of SH increasing sales of rooms – increased profit.  USP: by adding something unique to SH’s hotels it makes the service different from competitors allowing SH to charge a higher price – increased profitability.  Additional services: can differentiate SH from competitors allowing SH to charge a higher room rate – however the additional services can increase costs and reduce profit.  Reducing services: stopping the joint venture to allow higher revenue from a restaurant – higher profit.  Additional product benefits: offering refreshments, for example, can give SH more opportunities for sales, increasing revenue – increased profit.  Reducing costs – being more efficient or getting rid of unnecessary services may allow SH to reduce costs and increase profitability – however customers may demand a lower price to compensate for the reduction in perceived quality.  Increasing quality: increasing the price customers are willing to pay – increased profit. Evaluation may include:  A judgement/evaluation over the suitability/usefulness of way(s) of adding value  Evaluation of the relative benefits/costs of different ways  Elements that the evaluation/judgement might depend upon: tourism, weather, current perception of SH, response from local competitors. ARA 2(d) Example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Develop a for high- This And Overall, it would USP quality means that increases be better for SH rooms. SH can the profit to develop a USP charge a made on (EVAL) because higher each room they will maintain price their quality standards which Reduce By making This could However, it is important in a costs some of increase may mean hotel (EVAL). the the profit of lower However, it cleaners SH quality depends on how redundant. rooms and SH’s competitors less sales. respond (EVAL).

Question 26

Friendly Fit (FF) FF is a public limited company that owns a popular social media and fitness app. The app was launched five years ago and …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘customers’ (line 6). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition should include the following elements: • an individual or business that purchases/buys products or services (goods) • from a business/firm/company/organisation/enterprise/market etc. Exemplar Rationale Marks Someone who buys a Both elements 2 product from a business. A purchaser of goods from a Both elements 2 business. A person who buys a product One element 1 Someone a business sells to One element 1 Someone who uses a Confusion with consumer 0 product 1(a)(ii) Explain the term ‘public limited company’ (line 1). 3 Award one mark for each point of explanation: Knowledge Marks C Example or some other way of showing good understanding, this could be another element from A, as 1 long as B has been awarded. B Understanding of the specific nature of a public limited company, e.g. shares may be sold to the general 1 public/through stock exchange, accounts must be published (not just made available). A Understanding of a limited company, e.g. limited liability, continuity and a separate legal identity, has 1 shareholders/ they sell shares. Note: A and B marks must be gained before C mark can be awarded. Content A public limited company has shareholders who can purchase shares through a stock exchange. It also has limited liability, continuity and a separate legal identify. It differs from a private limited company by being able to sell shares to the general public (through a stock exchange) and in having to publish (not just make available) its accounts. Exemplar Rationale Marks A PLC has limited liability (A) and All three elements can sell shares through the stock 3 exchange (B). An example of a PLC is McDonalds (C). It is owned by shareholders (A) and A and B only 2 anyone can buy shares (B). A PLC can sell shares (A) and has A only – do not award the a separate legal identity. If an C mark unless B has been owner dies the business continues. awarded. 1 It must produce accounts each year and has unlimited liability. A PLC has unlimited liability, and Confusion with a 0 the owners must draw up a deed. partnership 1(b)(i) Refer to Table 1.1. Calculate FF’s profit margin for the app in 2020. 3 Rationale Marks Correct answer with or without correct working or % 3 Correct calculation of profit 2 Formula or correct calculation of TR 1 No creditable content 0 Content Total revenue − total costs  100 Total revenue 1.4 + 1.8 = 3.2 (TR) 3.2 – 2 = 1.2 (profit) 1.2  100 = 37.5% 3.2 Answer = 37.5% allow 38% (3) OFR Common incorrect answers Answer Mark Rationale 37.5 3 % sign not required. 1.6 + 1.4 = 3 (TR) 2 Answer given for 2021 data. With 3 – 2 = 1 (profit) working, this can be worth 2 marks for 1 the two stages. 3 x 100 = 33.3% 33.3% 0 Without working this can not be awarded marks. 1.4 + 1.8 = 3.2 1 One mark for TR – rest is incorrect 3.2 2.2 = 1.6 0.375 (with working) 2 Candidate did not create a percentage 0.375 (no working) 0 An incorrect answer with no working 1(b)(ii) Explain one way in which FF could use profit margin data. 3 Level Knowledge and Application Marks 2b Explanation of one way a business can use 3 (APP) profit margin data in context 2a Explanation of one way a business can use 2 (K+K) profit margin data 1 Identification of way a business can use 1 (K) profit margin data 0 No creditable content 0 OFR from answer to Q1(b)(i) Content Knowledge of a use of profit margin data may include: • As a way of monitoring business success - to make business decisions • Identifying areas for the business to work on - to improve the costs of the business • To attract investors – to show that it is still a good profit margin for investors. • To find external sources of finance – banks for example would want to know how profitable the business is. Application may come from the following points: • Use of Table 1.1 (including 33.3% profit margin in 2021) • FF is a public limited company • Owns a popular social media and fitness app. • App was launched five years ago. • Over three million users. • App is constantly developing features for users. • Revenue from advertising and sales/monthly fees. 1(b)(ii) ARA Exemplar Mark Rationale To compare the profit margin for 3 Knowledge and application investors (K) to see that the margin to the data. has decreased by 4.2% (APP). To attract investors (K) so that 2 Two pieces of knowledge, they know if the business is likely no context. to give them a return (K). To compare previous years (K). 1 One piece of knowledge. 1(c) Analyse two ways in which FF can increase the value added to its app 8 using the operations process. Knowledge and Analysis Level Application (4 Marks Marks (4 marks) marks) Shows Developed understanding of analysis of two APP DEV two ways ways operations 2b 4 + 4 + operations can can add value in add value in context APP DEV context Shows Developed understanding of analysis of one- one way way operations 2a 3 3 operations can APP can add value in DEV add value in context context Shows Limited analysis knowledge of K of two ways AN 1b two ways 2 + operations can 2 + operations can K add value in AN add value context Shows Limited analysis knowledge of of one-way 1a one way 1 K operations can 1 AN operations can add value add value 0 No creditable content 1(c) Indicative content AO1 Knowledge and understanding Knowledge of way(s) of adding value using the operations process may include: • Ways in which value can be added – i.e. extra features, etc. • Improve product • Process innovation • Add a feature/product/service • USP Allow anything that changes the app or service itself as this can be part of operations for a service/app. AO2 Application • Increasing the features of the app − More social media features, such as chat, selling/sharing best exercise practice, creating groups, etc. − More exercise features, such as group exercising, online classes, features for trainers to sell their services, etc. • Increasing the quality of the app − Reacting to any customer survey comments about the quality of the app − Reducing any connection issues with the app • Reducing the costs of producing the app − Costs may include, software development, wage costs, capital costs, research and development costs, market research costs (survey), marketing costs AO3 Analysis Must be an impact on the business cost(s) or price to add value. Do not allow increasing revenue/customers, etc. – there must be a change in the distance/proportion between cost and price. • An increase in price, from $10 to $12, would increase the revenue of FF (AN) – as long as the costs were kept the same (DEV). • Improving the features of the app would allow FF to charge a higher price (AN) – as long as the price increase was more than the extra costs of developing the app (DEV). • Eliminate the free access to the app, forcing the users to pay $10 (AN) – as long as some of the users do not cancel their subscription (DEV). • Labour costs could be lower if FF make some of their app designers redundant (AN) – as long as FF maintain their price (DEV). Note: developed analysis must show understanding of adding value, not just increasing revenue / decreasing costs. ARA 1(d) Evaluate the limitations of FF’s sampling process. 11 Knowledge and Analysis and Application Marks Evaluation Marks (4 marks) (7 marks) Annotation Annotation + Justified evaluation based EVAL 7 + on arguments in EVAL context EVAL Developed + evaluation based 6 on arguments in EVAL EVAL context An evaluative statement based 5 on arguments in EVAL context Shows Arguments based understanding of APP DEV on two limitations two limitations of 4 + 4 + of sampling in sampling in context APP DEV context Shows Argument based understanding of on one limitation one limitation of 3 3 APP of sampling in DEV sampling in context context Knowledge of two K Limited analysis of + limitations of 2 + two limitations of 2 AN K AN sampling sampling Shows knowledge Limited analysis of of one limitation of 1 K one limitation of 1 AN sampling sampling No creditable content 0 Note: there must be a limitation of sampling, not just market research, to award K and APP 1(d) Knowledge of limitations of sampling may include: • Chances of bias • May be unrepresentative • May have a high cost • May take time • May lead to incorrect data. Application may include: • Stratified based on age (example) • Current users only • Incentive to complete the survey • Only 30% actually completed survey • Survey was sent to only 1.67% of users • Only completed by 0.5% of total users • Allow use of Table 1.1 (including OFR from Q1bi) Analysis may include: • May not help FF to design features which will attract new users because they have only asked current users • Small sample size (AN) – is this representative of the entire customer base (DEV)? • Poor take-up of the survey – does this make the survey representative, and will the data actually give FF useful information? • Incentive may encourage positive answers which tell FF what they want to hear to encourage more ‘free’ months • Low take-up of the survey leading to increased costs (AN) – which may reduce the profitability of FF (DEV) • Might be more useful to hear from unhappy customers who are not using the app, as opposed to those who do use the app. Evaluation may include: • A judgement limitations of FF’s sampling methods • Evaluation of the relative impact of different limitations • Elements that the evaluation/judgement might depend upon – other research that might have been done, competitors actions/research, whether the sample is still representative after those who did not choose to answer, future revenue (falling at the moment if this continues may not be useful), end results of the research. ARA 1(d) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL It may be because FF This might Which leads The biggest biased is giving a lead to to FF limitation is the month’s respondent introducing bias, because free access. s only expensive FF may make giving new poor decisions positive features about replies to which do developing the get more not attract app. free access new This is likely to to the app. customers. have a bigger effect on the costs than the free months access. However this depends on how biased the data actually is. It has a high To send 50 This may than they cost 000 users a lead to FF gain in extra survey and spending revenue. the free more to find month’s out if users access. like the features

Question 27

Wedding Gifts (WG) WG is owned by Tomas who is a sole trader. He used to own part of a large wedding business which failed and went into ad…

Accepted Answer

2(a)(i) Identify one factor of production. 1 Indicative content Responses may include: The four factors of production: • land • labour • capital • enterprise/entrepreneurship. Do not accept examples of the factors of production. 2(a)(ii) Explain the term sole trader. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding • One individual or one person (must be a clear idea of a single person) owning a business . AO2 Application Limited application , applies knowledge of a sole trader through one aspect of the ownership. Developed application + applies knowledge of a sole trader through two or more aspects of the ownership. One mark for each of the following (up to a maximum of two marks): • unlimited liability • shared legal identity with business • no continuity • no requirement to produce or make available accounts • unincorporated / no shares / no shareholders • likely to be a small business • the owner keeps all the profits or bears the losses 2(a)(ii) • has all the risk • the owner has full control / makes all decisions themselves • example of a sole trader. Accept all valid responses. 2(b)(i) Refer to Table 2.1 and any other information. Calculate the total price of Jo’s order. 3 Indicative content 1 mark for formula or correct calculation of total costs ($450) 1 mark for calculation of mark-up (+50% OFR) 1 mark for calculation of price (adding TC to mark up OFR) • Formula: price = total costs (TVC + FC) + mark-up (1) • Calculation of total cost (1) – 250  $1.20 = $300 + $150 = $450 (1) • Calculation of price (1 OFR) – $450  1.5 = $675 Answer = ($)675 (3) 2(b)(ii) Explain one advantage for Tomas of using cost-based pricing. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Knowledge of an advantage of using cost-based pricing , including: • easy to calculate • flexibility/ can change price for different customers /products • all costs are covered • always provides a profit (margin per unit) / does not make a loss AO2 Application Limited application , applies knowledge to Tomas/WG once. Developed application + applies knowledge to Tomas/WG twice. Application of knowledge to FF may include: • answer to Q2(b)(i) (OFR) • Will give Tomas a 33.33% profit margin • Tomas’ variable costs ($1.20) 2(b)(ii) • Tomas’ allocated fixed costs ($150) • 3D printer accessories, such as computer, graphite, carbon fibre etc. • level of mark-up (50%) • Will provide Tomas with a $375 contribution to FC • Will provide Tomas with a $225 profit on Jo’s order Accept all valid responses. 2(c) Analyse one advantage and one disadvantage for Tomas of giving Jo the order for free. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two relevant Limited analysis relevant points is used points to a business • Limited analysis that identifies connections to answer the context. between causes, impacts and/or question. • Application of one relevant consequences of two points. • Knowledge of one point to a business • Limited analysis that identifies connections relevant point is used context. between causes, impacts and/or to answer the consequences of one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Annotate the advantage ( ) in the left margin. Annotate the disadvantage ( ) in the right margin. Responses may include: 2(c) AO1 Knowledge and understanding Knowledge of an advantage (max one ) might include: • open up new markets • promote the business • Increased publicity • increased (future) sales. Knowledge of a disadvantage (max one ) might include: • lost revenue • missed opportunity • Not cover costs • reduced profitability. AO2 Application Limited application, applies knowledge to Tomas/WG once. Developed application + applies knowledge to Tomas/WG twice. Max one for application in the advantage and max one for application in the disadvantage • Price with mark-up should be $675 (OFR from Q2(b)(i)) . • Total variable costs for the order of $300 . • Allocated fixed costs on this order of $150. • Total (full) cost will be $450. • Jo would like the products for free • Jo is a social media influencer 0.2m followers wedding streamed on internet • WG is at 90% capacity which may mean that he can produce Jo’s order 2(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Advantages, including: • (Open up new markets) may open WG up to a new market of people who might use WG in the future – increased sales, profit . • (Promote the business) marketing benefits may allow Tomas to increase sales and make the purchase of the new machine more likely – although may be busy, the promotion may lead to future orders which will be needed to afford the machine. • (Increased future sales) promotion through this is likely to be lower cost than above the line methods of promotion to a similar number of people – increased profitability. Disadvantages, including: • (Lost revenue) order would make a loss – which may affect Tomas’ income or lead to WG making a loss for the year . • (Missed opportunity) Since Jo has suggested promotion for WG, the price she paid may be advertised – leading to Tomas being unable to charge full-price to future orders. • (Reduced profitability) taking the order will affect Tomas’ profitability and may jeopardise his ability to gain external finance – may not be able to purchase the new machine. Accept all valid responses. 2(d) Evaluate the most important factor that may influence Tomas’ choice of sources of finance for the new 3D printing 12 machine. Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of that identifies • A developed and/or factor(s) is used relevant point(s) to connections between judgement/conclusion is made. to answer the question. the business causes, impacts • Developed evaluative context. and/or consequences. comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key term(s) application that identifies • A judgement/conclusion is and/or factor(s) is used of relevant point(s) connections between made with limited supporting to answer the question. to the business causes, impacts comment/evidence. context. and/or consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable No creditable No creditable response. response. response. 2(d) Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of a factor or knowledge of source(s) of finance. Developed knowledge + will be demonstrated through knowledge of a factor and knowledge of source(s) of finance. Factors influencing sources of finance, including: • cost • flexibility • need to retain control/ownership • the use to which it is put / type of business • level of existing debt • Availability of funds/finance – may not have any retained profit / may be a country with no banking infrastructure. • Size of the business – a large business may have more collateral. • Reputation (credit rating) – of the business/owner Knowledge of sources of finance • Internal and external sources of finance • Identification of any source of finance (owners’ investment, retained earnings, sale of unwanted assets, sale and • leaseback of non-current assets, working capital, share capital, debentures, new partners, venture capital, bank overdrafts, leasing, hire purchase, bank loans, mortgages, debt factoring, trade credit, micro-finance, crowd funding and government grants) AO2 Application Limited application applies knowledge to Tomas/WG once. Developed application + applies knowledge to Tomas/WG twice. • $60 000 for new machine • WG/Tomas is a sole trader • Previous business went into administration • WG is profitable • 33.33% profit margin 2(d) • 50% mark up • but not enough retained earnings to fund whole $60 000 • No current debts • Positive cash flow • Niche market • 3D printer, owned by Tomas AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. • (Cost) small businesses are likely to need an external source of finance – however there will be a cost (interest, payments etc.) which might make WG unprofitable . • (Flexibility) may allow a wider choice of source – however without repeat business there is little stability of income. • (Need to retain control) by taking a partner or selling shares the owner is likely to lose full control – however may not be able to attract an investor. • (The use to which it is put) gains a fixed asset with value – may make a securable source of finance more likely to be given (at a lower cost). • (Level of existing debt) will increase debt to be paid back – could makes some sources unobtainable or more expensive. • (Type of business) new businesses are likely to have high repayments – reducing the profitability. • (Ownership) selling part of the business may bring in enough capital – however the percentage required by the investor might be very high. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context • A judgement over the most important/influential factor when Tomas is choosing the sources of finance for the new 3D printing machine. 2(d) • Elements that the judgement could depend upon, including: level of current and forecast demand, will there be enough demand to cover the cost of repayments, potential partners/investors, will Tomas be able to work with these personalities, Tomas’ willingness to give up control of WG, the extent to which external sources of finance are open to Tomas with his background, the willingness of the supplier to offer terms of credit, etc. • Weighing up of the factors and their relative influence on Tomas’ decision of sources of finance. Accept all valid responses.

Question 28

Great Resources (GR) GR is a business partnership that creates educational resources. It sells direct to schools and teachers via its own w…

Accepted Answer

1(a)(i) Identify one barrier to entrepreneurship. Indicative content Identification of a barrier may include:  Lack of finances  lack of a strategic plan  fear of failure  strong rules and regulations  lack of capacity Accept all valid responses. 1 Question Answer Marks 1(a)(ii) Explain the term partnership. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of partnership may include:  Two or more owners of a business AO2 Application Limited application applies knowledge of a partnership one of the factors: Developed application + applies knowledge of a partnership to two of the factors  Unlimited liability  Unincorporated  Deeds of partnership  No shares  No continuity  No separation of legal personality  Shares profits Application can be made to the teachers/GR or any other scenario/context/business/person. Accept all valid responses. 3 Question Answer Marks 1(a)(ii) Exemplar and annotations Mark Rationale A business with 2 or more owners . For example, Sanjay, Rukmal and Boris will have created a deed of partnership to formally set out who invested what and what their returns are . 3 An answer which starts with the knowledge and then applies it to the case study. Where two or more owners directly share control of a business. A partnership does not limit the owners’ liability , and there is no continuity . 3 Again, knowledge first, followed by application to a decision (unlimited liability) and no continuity. It is an unincorporated business , and both partners will be liable for the debt because both partners share control and responsibility for the business . 3 A different way of answering the question. There is developed application to one element of a partnership (the liability) as well as clear knowledge of the concept by the end of the response. Where two or more owners directly share control of a business. A partnership does not limit the owners’ liability , so the owners could lose their personal assets in a bankruptcy. 2 Again, knowledge first, followed by application to a decision (unlimited liability) however the second point is a repetition. Two people share control of a business . For example, two people invest and share the responsibilities for running a business . 2 BOD knowledge. Some application of a choice, but not expanded. Two people owning a business . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. When two people manage/run a business . 0 No ownership of a business mentioned. Question Answer Marks 1(b)(i) Refer to Table 1.1. Calculate GR’s market share by revenue. Indicative content Formula: Total sales of business Total market sales  100 (1 mark – formula) Total sales = 15000 500000  100 (1 mark – ID/use of correct figures) Total Sales = 3% (1 mark – correct answer, no % needed) Final answer for MS = 3 (%) (3 marks – no % or working needed) OFR applies Marks 3 marks Correct answer (3) Working and % do not matter. Must be three to denote the three marks. 2 marks EITHER  Correct formula AND  Correct identification of figures OR  An incorrect answer with one mistake allowing OFR for final stage. To award two marks, there must be  Two and a OR  One , one and one 1 mark One of the following:  Correct formula  Correct identification of figures in an incorrect formula To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be  One 3 Question Answer Marks 1(b)(ii) Explain one factor which may influence the supply of GR’s products. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a factor that may influence the supply of products :  Knowledge of the impact of a lack of one or more of the factors of production (land, labour, capital and/or enterprise)  Price of the item (if the price is high, it will be supplied, if low then maybe not) (not demand)  The appropriateness of the sales platform  The choice of marketing media chosen  Cost of production  Government taxes/subsidies that affect suppliers  Advances in technology which affect the cost of production  Return on investment  Feasibility of market share 3 Question Answer Marks 1(b)(ii) AO2 Application Limited application , applies knowledge of one factor that influences supply to Sanjay, Rukmal and Boris (SRB)/GR once. Developed application + applies knowledge of one factor that influences supply to SRB/GR twice. Application of a factor may include:  OFD is a partnership including SRB: 3 only/enough to create enough resources/breadth of subject knowledge  GR has a low 3% market share in comparison to 60% EM so less competitiveness in advertising  Cost of developing/selling interactive digital materials may rise/reduce the incentive to produce  Lack of conversion to regular subscriptions may reduce the return on investment and cause a lack of motivation to write new/update materials  direct sales to schools on its own website/is the website/ increased cost of maintenance/ reduce profit margins  GR only has $5000 debt/potential to borrow more/invest in new software  Poor cashflow/banks may not see profitability/lack of opportunity to invest  Answer from Q1(b)(i) (OFR applies)  GR offers one month’s free membership but is unable to convert many to regular subscriptions  Revenue has not increased as much as hoped Accept all valid responses. Question Answer Marks 1(b)(ii) Exemplar and annotations Mark Rationale A factor would be the available capital , because free trials are not converting into subscriptions which means revenue is not increasing as much as hoped . 3 (Availability of) capital is a reasonable factor, explained in the specific context of SRB/GR by using the in-text data. GR may not be able to compete when advertising , as they only have 3% MS and GR has 60% and are well known and trusted . 3 Ability to compete is reasonable and there are two specific pieces of context based on this so two . 300 customers is not enough to make the business a success as EM spends 6 x more on advertising than GR makes in revenue so the amount of finance available may influence the ability to compete. 3 Although the appears first, it cannot be awarded until the has been found. However, there is obvious , so you can go back and award the . Government taxes may make the cost of supply too high which is why they only have 300 customers . 2 The mention of taxes, although not in context, is still a factor that influences supply . The context of 300 customers linked to this is reasonable , but only one point of application. The level of expertise of the suppliers because if the output is poor and not well-regarded the business might ultimately fail . 1 Expertise is a factor (enterprise). The rest of the answer is not applying it to the context, so (Not Answering Question). EM is much larger than GR and has 4700 more customers which means that they have larger brand awareness and customers are more likely to trust them and choose them . 0 Although there is some relevant context, there is no knowledge of a factor, so no marks can be awarded. The answer is based on demand, not supply. Question Answer Marks 1(c) Analyse one advantage and one disadvantage to GR of using a bank overdraft. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 marks 2 3–4 marks Developed analysis  Developed analysis that identifies connections between causes, impacts and/or consequences of two points.  Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. *Advantage in the left hand side column, disadvantage in the right hand side column 8 Question Answer Marks 1(c) Indicative content AO1 Knowledge and understanding  An overdraft is a credit that the bank agrees that can be borrowed by a business/individual up to an agreed limit and as required. Knowledge of the advantages of using a bank overdraft (max 1 ), may include:  Flexibility  Amount used can vary from day to day  Allows a business to overdraw on its account  Can make payments of a greater value than the balance of an account  The maximum amount agreed in advance allows for financial planning/emergencies  Useful for short term lack of cashflow Knowledge of the disadvantages of using a bank overdraft (max 1 ), may include:  High interest charges  Can be withdrawn if the bank has concerns  Usually limited amounts  For short term cashflow issues only AO2 Application Max one for application in the first benefit and max one for application in the first disadvantage. Application of knowledge of bank overdrafts to GR (max 2 s), including:  OFD is a partnership  Sells to schools on its own website  Entrepreneurial teachers  Interactive digital resources  Subscription only  Online marketing campaign used penetration pricing, attracting 250 subscribers in the first six months of operation.  Start-up costs financed with a $5000 bank overdraft, which is GR’s only debt  Cash flow is poor  Recent sales promotion for one month’s free membership  Few have then taken out a regular subscription  Must now consider alternative promotion methods – advertising in an educational newspaper  EM also advertises in the ed paper, is well known and trusted  Any data from Table 14.1 Question Answer Marks 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Advantages  Flexible cashflow allows for flexibility in use. This can cover lower than expected cashflow – ensures that all payments can be made if the account is not in credit.  Lowers the cost of borrowing in the long term for investment which is designed to generate a quick return on investment – allows for increased profit margins. Disadvantages  High cost of borrowing can reduce profit margins – leaves less for future investment.  The withdrawal of the overdraft with short notice could mean there is not sufficient capital available for the planned advertising – alternative funding would have to be found which increases risk/time frame. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Useful for short term planning for periods of negative cashflow . As the recent sales promotion did not convert many free membership trials into regular subscriptions on the induction training. Which may not cover the costs of promotion which means there may not be enough money in the bank account to pay for new (newspaper) adverts . Overdrafts have high interest rates . Which places pressure on the already poor cashflow/partners . Which could make the business unprofitable and put the personal assets (of the partners) at risk . Question Answer Marks 1(d) Evaluate whether price or promotion is the most important element of GR’s marketing mix. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Evaluative judgement (a definitive answer to the question) in the LHS margins Evaluative comments (however/the other side/a rebuttal) in the RHS margins 12 Question Answer Marks 1(d) Indicative content AO1 Knowledge and understanding Knowledge of the marketing mix (max 1 for knowledge of product OR price; 2 for knowledge of product AND price) including:  Knowledge of price  Can go up  Can go down  Can stay the same  Pricing strategies  (allow but not require knowledge of elasticity)  Knowledge of promotion  Digital promotion  Direct promotion  Sales promotion  Advertising  Above and below the line AO2 Application Limited application applies knowledge of price OR promotion information to GR Developed application + applies knowledge of price AND promotion information to GR.  creates educational resources  sells direct to schools and teachers via its own website  interactive, digital resources  GR is subscription only  online marketing campaign, which used penetration pricing  Reviews for GR’s products in teaching journals are positive but cash flow is poor  recent sales promotion for one month’s free membership and posted positive reviews  decided to advertise in an educational newspaper with a readership of half a million people  Any data in Table 1.1 Question Answer Marks 1(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Price  The penetration pricing model attracted 250 subscribers in 6 months, which shows that customers are price sensitive – and will be attracted to a cheaper option  Subscription model may not be considered as a suitable pricing method by customers who do not like continuous cash outflows – especially if they do not have budgets – reduces demand  The price may be higher than /not as competitive as EM, the established competition – may be seen as better value – attracts a larger market share  The price charged covers the annual advertising spend, however, investment into a newspaper campaign will increase costs – will either reduce profits or increase the price Promotion  effective promotion grows the brand– increases brand loyalty  Without promotion customers will not know the brand exists – reduces cash inflows  Incorrect promotion wastes valuable resources – opportunity cost for product development AO4 Evaluation Limited evaluation - unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context.  Relative importance of price and promotion – are other issues more important? e.g. potential customer demand, marketing, qualities/skills of entrepreneurs in creating digital resources  Accuracy of promotion/price depends on GR market research and business knowledge/experience. External factors could impact the accuracy of the market research, such as existing contracts, available budgets and competitor materials  The impact of inaccurate customer predictions may be based on unrealistic expectations  A judgement on which factor is the most important of GR’s marketing mix (could be any of the 4 available). Accept all valid responses. Question Answer Marks 1(d) Exemplar and annotations Price can vary in relation to demand. . It is important to get price right as GR is challenging a well-known and trusted market leader. The information shows that price is important in the overall mix as penetration pricing attracted 250 out of 300 customers in the initial stages, however a regular price has only attracted a further 50 customers. This shows that customers are price sensitive and if the price/pricing model is incorrect, it would lead to GR’s cash flow and profitability remaining poor . The original online marketing campaign may have only advertised to a niche market while the educational newspaper reaches the mass market. As EM still uses this medium and is the market leader, a successful promotional piece could introduce their service to a wider customer base and increase the number of subscribers to their digital resource platform. Therefore, pricing is the most important element of GR’s marketing mix as even a great promotional campaign that sets the wrong price is unlikely to persuade potential customers to sign up to a costly subscription service . However, this also depends on whether GR has used the right place to advertise its interactive digital services as an educational newspaper may not be used by the technologically savvy teachers who would be GR’s target market and may consist of technologically illiterate teachers who may not use their service at any price. Therefore, while price is the most important element as price sensitivity seems to be high, GR must ensure it targets the appropriate market segment. *A judgement OR a comment is the bottom of the level/A judgement AND a comment is the top of the level ** A Judgement is a yes or no, a comment is anything weighing up the other side of the argument. AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

Question 29

Great Desks (GD) GD is a co-operative owned by all of its employees. It manufactures desks for schools, offices and home use. The products …

Accepted Answer

2(a)(i) Identify one advantage to a business of using job production. Indicative content Identification of an advantage may include:  (High) quality product  Can customise orders/wants.  Workers involved in the entire process. Accept all valid responses. 1 Question Answer Marks 2(a)(ii) Explain the term just in time (JIT). AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding. Just-in-time production minimises the time, labour, and materials in a manufacturing process. It does so by only producing goods as they are needed. The desired outcome is a streamlined production system that maintains a minimal amount of on-site raw materials, minimal wait times in the production process and small batch sizes. Knowledge of JIT may include:  Inventory control system/production system  Buying inventory occurs when needed for production rather than using buffer stock (production).  JIT conditions need to be met e.g., reliable suppliers. AO2 Application Limited application applies knowledge of JIT to  An example of inventory OR an example of when it is needed. Developed application + applies knowledge of JIT to  An example of inventory AND an example of when it is needed. 3 Question Answer Marks 2(a)(ii) Application can be made to GD or any other scenario/context/business. Accept all valid responses. Exemplar and annotations Mark Rationale Order raw materials when needed . For example, a manufacturer requires 1000 pieces of wood to produce a product would order when there is 1000 pieces of wood left .This could reduce waste and employees would know that there is not any spare materials so they can’t make mistakes. 3 An answer which starts with the knowledge and then applies it to a business context. Holding zero buffer inventories . Components for making desks will be ordered when GD needs them . This will reduce storage costs for GD . 3 In the context of the business, GD. Inventory would come just when needed , but the company may need expensive IT systems to manage orders . 2 Clear knowledge. Some application but not developed. Not keeping any inventory, just ordering when needed. . 1 A reasonable definition but no application. Question Answer Marks 2(b)(i) Refer to Table 2.1. Calculate GD’s forecast closing balance in 2025. Indicative content Responses may include: Formula/implied formula: closing balance = net cash flow +opening balance (1) Net cash flow = 9 – 12 (1) = –3 (1) Closing balance 2020 = –3 + 1 = –2 (3) Accept 2 in brackets in place of – sign OFR Marks Answer Rationale 3 marks Correct answer –2 or (2) Working and $ sign do not matter. Must be three to denote the three marks. 2 marks Both of the following:  Correct/implied formula (net cash flow +opening balance)  Correct calculation of net cash flow (-3) OR An incorrect answer with one mistake allowing OFR for final stage. OR 2 (has not included – sign) To award two marks, there must be:  Two and a OR  One , one and one 1 mark One of the following:  Correct/implied formula (net cash flow + opening balance)  Correct calculation of net cash flow (–3) To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be:  One 3 Question Answer Marks 2(b)(ii) Explain one disadvantage to GD’s employees of it being a co-operative. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a disadvantage may include:  Complex decisions = uncertainty = poor performance  Workers and worker directors might not have skills for decisions  Management roles unclear and therefore inefficiencies can occur  Unpredictable income for employees  Conflict/disagreements between employees AO2 Application Limited application , applies knowledge to GD once. Developed application + applies knowledge to GD twice.  Ownership by workers who may be more interested in high profits.  Low wages compensated by profit share.  Poor decision making by manager.  Take decisions on votes not valid arguments. 3 Question Answer Marks 2(b)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale They may have limited capital as need $2m to open their own retail shop , as the members (employees) accept low salaries and the investment may mean a lower share of profits for each of them. 3 A disadvantage using the context of opening a retail shop and that members accept low wages. They may face conflicts among members, as all have a vote, due to differences in opinions , interests or planning, especially regarding the plan to open their own retail shop or the management style of Steve . 3 Conflict is reasonable and two references to the case study for 2 s. Part of the income employees earn comes from profit- share. This may mean that the employees could face lower income if sales fall or costs rise. 2 As there is knowledge of a disadvantage so can go back and award the APP. They may lack secrecy as the affairs of the co- operative are open to all members and sometimes to the public, which may expose them to competition. 1 Lack of secrecy a reasonable disadvantage, but the rest is not specifically related to GD. They may have inefficient management as Steve, the Managing Director, spends too much time trying to make people happy rather than solving problems and responds to opinions rather than setting long-term plans. 0 Although there is some relevant context, there is no knowledge of a disadvantage specific to a co-op (inefficient management could be in any business structure), so no marks can be awarded. Question Answer Marks 2(c) Analyse two sources of finance GD could use to open its new shop. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 marks 2 3–4 marks Developed analysis  Developed analysis that identifies connections between causes, impacts and/or consequences of two points.  Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 8 Question Answer Marks 2(c) Indicative content Knowledge of sources of finance (max 2 s), may include: AO1 Knowledge and understanding.  Bank loan  Open own shop so mortgage  Owners’ capital  Sale of unused assets  Venture capital can be awarded for knowledge of any source of finance. AO2 Application Max one for application for the first source and another for application for the second source Application of knowledge of a source of finance for GD (max 2 s), including:  $2m needed  Retained profits not known but could make useful contribution if available  Few current assets (JIT) so not suitable to convert into cash  No loan payments shown so no debts  Employees are the owners, low paid  Cash balance reducing AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Analysis of sources of finance may include:  Long term loan may be suitable – but would banks lend to a co-operative?  Unlikely to be any unused assets – even if there were it may not be enough for such a large sum.  Owners/employees/members may not agree with the plan – so may not be willing to contribute more  Effect on liquidity – interest payments will increase cash outflow. and can be awarded for analysis of any source of finance. Accept all valid responses. Question Answer Marks 2(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar of an advantage Annotations for the first source should be placed in the left-hand margin. Retained profit Employees would receive less through profit-sharing at the end of the year . This option would allow GD to use its own money without increasing its debt or giving up any ownership. However, it would also mean that the employees would receive less profit-sharing at the end of the year, which could affect their motivation and satisfaction. Exemplar of a disadvantage Annotations for the second source should be placed in the right-hand margin. Venture capital Might be attractive to an investor as have 5 years of rapid growth with a forecast of higher demand for desks . This option would not require GD to repay or pay interest on the money received but may come with some conditions or expectations from the investors . This could limit GD’s autonomy or flexibility in running the business or pursuing its social or environmental mission. It could also create a dependency on external funding, which may not be sustainable or reliable in the long term. Question Answer Marks 2(d) Evaluate whether Steve’s management style will contribute to GD’s future success. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 12 Question Answer Marks 2(d) Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/ conclusion is made with limited supporting comment/ evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of management styles (max 2 s), including:  Democratic – The manager shares the decision-making power and authority with their employees. The manager encourages and facilitates collaboration and teamwork among the employees and allows them to have a say in how they work.  Laissez-faire – The manager gives their employees complete freedom and autonomy to make their own decisions and manage their own work. The manager provides minimal guidance and supervision and trusts the employees to perform well.  Autocratic – The manager dictates exactly what they require their subordinates to do and how they should do it. Sets targets. The manager has all the power and authority and does not tolerate any deviation or feedback from the employees.  Paternalistic – The manager acts like a parent or a guardian to their employees, providing them with guidance, support, and protection. The manager has all the power and authority, but also cares about the welfare and personal development of the employees.  Functions of management – Planning, organising, directing, controlling. Question Answer Marks 2(d) AO2 Application Limited application applies knowledge of management styles to GD once. Developed application + applies knowledge of management styles to GD twice.  There are suggestions that Steve is too democratic/laissez faire or may be described as paternalistic as wants people to be happy.  Theory Y manager  Managers need to make effective decisions and be responsive, but employees don’t think that Steve makes effective decisions.  Steve does not see threats to the business.  Steve does not make-long term plans.  Steve does not consider the merits of an argument but relies on votes of members.  Rapid growth in sales and profits over the past 5 years but negative cash flow recently  Evidence of planning as aim to open own retail shop.  Motivated employees as Steve concerned about their welfare/demotivated as evidenced by concerns about Steve’s style. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis.  Builds good relationships – particularly as owners are the employees.  Some workers may feel that the Steve has the right approach – so feel secure as a result of this; for example, they have a vote and key role in decision making.  Suitable for GD’s highly skilled and motivated staff – but could lead to power struggles.  There is a lack of strategy for the future of the business – so there is a risk to the security and stability of GD.  If threats are not being monitored – then GD is at risk and could fail.  Motivated workers – greater productivity  Lack of long-term planning – less potential for future growth  Plans to open retail shop – evidence of planning. Question Answer Marks 2(d) AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context. An evaluation is likely to come from candidates making a judgment and justification on the effectiveness of Steve’s management style e.g. It may be suggested that the Steve need to be more ‘hands on’ and autocratic, due to the change from batch production to mass customisation. Is this suitable for a co-operative? It may result in conflict which reduces productivity, output and sales.  Any changes that might need to be made to make it more effective.  Suitability of management styles for a co-operative  In relation to the change in production process  Judgement on most likely effects on success Accept all valid responses. Question Answer Marks 2(d) Exemplar and annotations Steve’s management style seems to be a democratic one , which is a type of participative management style . This means that he values the input and opinions of his employees and tries to involve them in decision-making and problem-solving. He also tends to be flexible, adaptable, and responsive to feedback which might suit a co-operative organisation . Some of the advantages of this management style are that it can increase employee engagement, motivation, creativity, and satisfaction . It can also foster a positive work culture, where employees feel respected and valued . It can also lead to better decisions, as more perspectives and ideas are considered . However, some of the disadvantages of this management style are that it can be time-consuming, inefficient, and confusing . It can also create conflicts among employees, or between employees and managers. It can also make it difficult to implement changes or deal with crises, as there may be too much debate or uncertainty . It can also undermine the authority and credibility of the manager, if they appear indecisive, weak, or dependent on others . Therefore, Steve’s management style may not contribute to GD’s future success, unless he can balance it with other styles when needed. For example, he may need to adopt a more authoritative or persuasive style when he needs to set clear goals, communicate expectations, or motivate employees to achieve results . He may also need to adopt a more transformational or visionary style when he needs to inspire employees with a shared vision, foster innovation, or cope with change. He may also need to adopt a more coaching style when he needs to develop the skills and potential of his employees. In conclusion, Steve’s management style has its strengths and weaknesses, but it may not be enough to ensure GD’s future success. He should be able to adapt his style according to the situation, the goals, and the people involved . AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

Question 30

Post Scent (PS) PS is a private limited company operating in country H. It sells perfume for men and women using its own website. PS purcha…

Accepted Answer

1(a)(i) Identify one feature of a private limited company. Responses may include: Any feature of a private limited company , including:  limited liability  shareholders  incorporated  shares not traded on stock exchange/publicly  must make accounts publicly available  separate legal identity  continuity  sells shares to people they know (invited). Accept all valid responses. 1 Question Answer Marks 1(a)(ii) Explain the term sustainability. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of sustainability may include:  maintaining operations/production. Allow (but do not require) knowledge of sustainability from an environmental perspective, which may include:  environmental balance.  conserve natural resources. 3 Question Answer Marks 1(a)(ii) AO2 Application Explanation of sustainability may include:  maintaining operations/production: at the current level  the ability to maintain an environmental balance: now and in the future for our planet's natural environment  to conserve natural resources: to support the wellbeing of current and future generations Context applied to business of how to behave in a sustainable way , including:  An example of a business behaving in a sustainable way Application can be made to PS or any other scenario/context/business/person. Allow application to environmental sustainability. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of sustainability 1 mark Explanation Explanation of sustainability 1 mark Context Applied to a business context/ business environment 1 mark Question Answer Marks 1(a)(ii) Exemplar and annotations Mark Rationale Keeping the natural environment safe now . So that it is usable in the future , to reduce dependence on single use plastic . 3 Sustainability from an environmental perspective – what the business could do now and then explained in terms of how it might help the future – plus an example (single use plastic) Making sure a business can maintain its current production now and in the future . For example, not relying on fossil fuels . 3 Clear knowledge based on now and in the future , with a clear example. Sustainability involves looking after the environment for example by recycling 2 Knowledge and an example – no explanation. Sustainability is a social goal about the ability of people to co-exist on Earth over a long time. . 1 A reasonable definition with the idea of now and the future. Sustainability is about looking to the future. 0 Too vague. Some idea of the future, but not about maintaining now. Question Answer Marks 1(b)(i) Refer to Table 1.1. Calculate the variances in 2023 (x, y and z) and state whether each variance is favourable or adverse. Budgeted Actual Variance $000 $000 Revenue 500 600 100 and Favourable (F) Direct costs 300 350 50 and Adverse (A) Indirect costs 150 125 25 and Favourable (F) 1 mark for each correctly calculated variance (including favourable or adverse). Ignore + and – signs. Allow unfavourable. 3 Question Answer Marks 1(b)(ii) Explain one benefit to PS of using incremental budgeting. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a benefit of using incremental budgeting , including:  Simplicity / easy to adjust  Speed (quicker)  Consistency  Avoids conflict between managers  Realistic  Allows business to respond to changes Must be about incremental budgeting. As opposed to budgeting in general. No further marks can be gained without knowledge and understanding of a benefit of incremental budgeting. 3 Question Answer Marks 1(b)(ii) AO2 Application Explanation of a benefit of using incremental budgeting , including:  Simplicity; by adding a small amount to the previous time period, this avoids any complicated preparations  Speed (quicker); reduced the time needed to prepare a business’ budgets  Consistency; as each budget uses the previous as a base, there is a consistent approach every time  Avoids conflict between managers; due to the consistent approach  Realistic; because based on previous data Context of a benefit of using incremental budgeting , including:  Use of Table 1.1  Each budget has a variance  OFR from answer to Q1(b)(i)  PS sells through its own website  Web sales and subscription available  PS uses the postal service  Aim to improve the sustainability of its operations  New Marketing Manager being recruited Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of a benefit of using incremental budgeting 1 mark Explanation Explanation of a benefit to a business of using incremental budgeting 1 mark Context Context linked to a benefit to PS of using incremental budgeting 1 mark Question Answer Marks 1(b)(ii) Exemplar and annotations Mark Rationale It is quicker than other methods of budgeting because the Manager just adds on a small amount to budget from last year which means they can focus on PS’s website . 3 Speed/quicker is enough for knowledge, which is then explained with context. Because it is based on past data incremental budgeting is more realistic , so that the revenue variance should be less than 100 next year . 3 Starts with the explanation, followed by the knowledge. Without the knowledge, this would be 0 marks. The example has OFR based on the answer to Q1(b)(i). It is easy to use incremental budgeting because it’s based on previous figures . 2 Knowledge (easy to use) with some explanation, but no context. It is easier as they can just add 100 to the revenue budget . 2 Knowledge and context. Incremental budgeting is easier and quicker than other forms of budgeting such as zero budgeting, where the Manager has to start from scratch every year. There is also historical budgeting which is doing it based on what happened in the past. This would take longer and be more complicated than incremental budgeting. 1 Knowledge at the start – the rest of the answer is NAQ. Incremental budgeting involves adding a small amount to each of the budgets for previous years. 0 There is knowledge of incremental budgeting, but no knowledge of a benefit. Incremental budgeting is about guessing how much revenue, cost and profit a business will achieve and then comparing this to what actually happened. PS had a variance on every budget, so they must not have done their budgeting well. 0 No knowledge of a benefit of incremental budgeting. Question Answer Marks 1(c) Analyse one advantage and one disadvantage to PS of using an assessment centre when selecting a Marketing Manager. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 marks 2 3–4 marks Developed analysis  Developed analysis that identifies connections between causes, impacts and/or consequences of two points.  Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 8 Question Answer Marks 1(c) Indicative content AO1 Knowledge and understanding Knowledge of an assessment centre (max 1 mark if no knowledge of advantage or disadvantage), including:  a combination of tasks and activities that test suitability for the job  chance to demonstrate a wider range of skills than during a traditional face-to-face interview.  hosted over anything from an afternoon to two days  often the final stage of the selection process  a group of candidates usually attend together. Knowledge of an advantage (max 1 mark – annotate on left) may include:  More suitable/knowledgeable/skilled recruit  Wider skilled recruit / more skills tested  More detailed process  Useful as final stage of recruitment  Allows direct comparison with other candidates  Less time involved Knowledge of a disadvantage (max 1 mark – annotate on right) may include:  Takes more time  Cost of an assessment centre  Not realistic / not linked to specific employment / may assess unnecessary skills / knowledge AO2 Application Context applied to an advantage (max 1 mark) and disadvantage (max 1 mark) of using an assessment centre, including:  To plan the recruitment and training of a new sales team.  To organise the production of digital promotions.  To advise the board of directors on changes to the PS product portfolio.  To do tasks relating to the marketing of PS (e.g. perfume, website sales, subscription sales, importance of packaging).  Five shortlisted applicants.  Use of Table 1.1 Question Answer Marks 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Advantages may include:  More suitable recruit  lower costs of marketing – increase profitability  higher sales – increase profits  Wider skilled recruit  lower costs of marketing – increase profitability  higher sales – increase profits  Longer process than an interview; more likely to find a better candidate – increase sales and growth of PS.  Final stage of recruitment; may be a suitable way to distinguish between qualified and similar candidates – increase chances of getting the best candidate.  Allows direct comparison with other candidates – increases probability of finding the best candidate who can improve the marketing of PS.  Disadvantages may include:  Takes more time; increase costs – reduces profitability.  May assess unnecessary skills and provides an unrealistic image of the candidates and increases the probability of choosing the wrong candidate – increases costs in the long run (more recruitment needed).  Cost of an assessment centre; significantly more expensive than an interview – decreased profitability. Accept all valid responses. Question Answer Marks 1(c) Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis Better skilled employees . So that PS can make sure their new manager can organise the production of digital promotions . Which can help PS to increase their sales revenue by selling more perfume and make a greater profit . Assessment centres have a high cost As all five potential managers will be invited. Which will reduce the profitability of PS and reduce the dividends for the shareholders . Question Answer Marks 1(d) Evaluate the role of effective packaging for PS. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 12 Question Answer Marks 1(d) Indicative content AO1 Knowledge and understanding Knowledge of the role of packaging (max 2 marks), including:  information to customers  protection for the product  to attract potential customers  to promote a brand / branding  to enable efficient distribution/portability  to add value  to meet legal requirements (labelling, weight, ingredients etc.) AO2 Application Context applied to the role of packaging for PS (max 2 marks), including  website purchases  subscription purchases  Most perfumes sold in glass bottles (fragility)  all products delivered to homes by post  can be left in mailbox  can be left in safe place outside of the home (weatherproof)  PS aim to improve sustainability of operations  use of Table 1.1 Question Answer Marks 1(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis.  Information to customers; to increase sales of both product lines for PS – increase profits and enable growth of SS.  Protection for the product;  Glass bottles will break if not packaged correctly – PS needs to replace products increasing costs  Packages need to be able to be left outdoors – otherwise poor customer satisfaction and lower repeat sales.  To attract potential customers; good packaging may encourage increased sales from customers – however as the products are sold through the website this may not have a large effect on sales.  To enable efficient distribution/portability; products left in mailbox so packaging needs to be small enough to post and increase speed of delivery – reduces costs of delivering the product.  To add value – sales have been 20% higher than budgeted so poor packaging might discourage customers from repurchasing products – increases sales/profit.  The packaging is not the main product and so may not add much value in a customer’s perception – increased costs without an increase in sales.  Balance between importance of packaging and sustainability – more packaging likely to protect the product but also less sustainability. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context.  A judgement over role of effective packaging.  Evaluation of the relative importance of different factors.  Elements that the evaluation/judgement might depend upon – cost of the packaging as a proportion of the total costs of the product, packaging that the perfume is purchased with (from manufacturers), likelihood of products being left outside, likelihood of moving into retail shops in the future, the new Marketing Manager’s strategy. Accept all valid responses. Question Answer Marks 1(d) Exemplars for awarding evaluation L1 (limited supporting evidence) L2 (developed supporting evidence) L3 (developed supporting evidence with context) Effective packaging is essential for PS. Effective packaging is essential for PS, so that their products are delivered safely to customers. Effective packaging is essential for PS, so that the glass bottles are delivered unbroken to customers. There are many more things that are more important to PS than packaging. There are many more things that are more important to PS than packaging. If the price is wrong, then no matter how good the packaging is, no-one will want it. There are many more things that are more important to PS than packaging. If the price is wrong, then no matter how good the packaging is, no-one will want it, that is why PS sells its perfume cheaper than high street stores. The role of packaging depends upon the cost of the packaging. The role of packaging depends upon the cost of the packaging. If the packaging increases PS direct costs, then it may be better to spend the money on more promotion. The role of packaging depends upon the cost of the packaging. If the packaging increases PS direct costs beyond $350 000, then it may be better to spend the money on more promotion. In the short term, effective packaging may cost too much. In the short term, effective packaging may cost too much, however in the long term it will make the PS brand memorable. In the short term, effective packaging may cost too much, however in the long term it will make the PS brand memorable, which is vital to keep customers paying for their subscription.

Question 31

Coffee Company Local (CCL) CCL is a family business in country Y. It manufactures and sells coffee powder, which is used to make coffee dri…

Accepted Answer

2(a)(i) Identify one strength of a family business 1 Indicative content Strengths may include: • joint personal stake • united sense of purpose • trust • tend to take a long-run view • commitment • can be passed on to future generations • knowledge continuity Note: Must relate to a family business, for example, continuity on its own not enough Accept all valid responses. 2(a)(ii) Explain the term niche market 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to Limited application of one relevant point to a business context. answer the question. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a niche market (max 1 mark), including: • (small) segment of a large market • unique/specialised products • luxury • high quality AO2 Application Explanation of a niche market , including: • often unprofitable for large companies • profits often higher/can be sold at a premium price • few competitors • limited quantities produced • customers have similar qualities/preferences Context applied to niche market , including: • examples of niche markets • CCL sell product C in a niche market 2(a)(ii) Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of a niche market 1 mark Explanation Development of the K point/characteristic of a niche market 1 mark Context Applied to a business context/business environment 1 mark Exemplars and annotations Marks Rationale Segment of a large market that sells luxury 3 K for segment of a large market, APP for explaining sells items such as the market for Rolex watches luxury good and APP for the example Small segment of a market with few 2 K for small segment of a market, APP for characteristic. No competitors context APP Small segment of a mass market 1 K only 2(b)(i) Refer to Table 2.1 and other information. Calculate the forecast total revenue of product C in 2024. 3 Total revenue x proportion of revenue (1) Total Revenue 2023 $10 million forecast to increase by 10% = $10 million + $1 million = $11 million (1) Product C = 15% proportion of revenue = $11 million/100  15 (1) = $1.65 million (3) Accept all valid responses. Marks 3 marks Correct answer Working, $ and millions (m) do not matter. $1.65 million 2 marks Formula To award two marks, there must be OR • Two and a Identifies correct figures OR AND • One , one andone Calculates increase in total revenue – $11m 1 mark One of the following: To award one mark, there must be: Formula • One and two OR Identifies correct figures OR Calculates increase in total revenue – $11m 0 marks No creditable content. To award zero marks, there must be • One 2(b)(ii) Explain one benefit to CCL of using a budget. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer Limited application of one relevant point to a business context. the question. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a benefit of using a budget, including: • coordinates activities • translate objectives into strategy • translate strategy into tactics • provide a record of organisational activities • can improve communication • improve resource allocation • improve efficiency • provides a tool for corrective action • compare different areas of the business AO2 Application Explanation of a benefit of using budgets , including: • coordinates activities; between functional areas of the business • translate objectives into strategy; to make sure the objective is met • translate strategy into tactics; to make the strategy is implemented • provide a record of organisational activities; for later comparison 2(b)(ii) • can improve communication/coordination; by giving financial targets • improve resources allocation; by giving a quantitative target • improve efficiency; by allocating finances to different areas of the organisation • provides a tool for corrective action; when actual and budgeted are compared Context applied to a benefit to CCL of using a budget including: • two products at maturity • two products with low market share • niche market product has lowest contribution to total revenue • market forecast of 25% growth Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of a benefit of using budgets 1 mark Explanation Explanation of a benefit of using budgets 1 mark Context Context linked to a benefit of using budgets 1 mark Exemplar and annotations Mar Rationale k Improve resources allocation by giving a quantitative target to 3 K for benefit, then APP for explaining why a enable CCL to benefit from the forecast market growth benefit and APP for context from the case study By allocating finances to different areas of the organisation can 2 K for benefit, then APP for explaining why a improve efficiency benefit but there is no context Improve resource allocation 1 K only Sets financial targets No K of a benefit demonstrated 2(c) Analyse one advantage and one disadvantage to CCL of using Boston matrix analysis. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections between used to answer the business context. causes, impacts and/or consequences of two points. question. • Application of one • Limited analysis that identifies connections between • Knowledge of one relevant point to a causes, impacts and/or consequences of one point. relevant point is business context. used to answer the question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of the Boston matrix (max 1 mark if no knowledge of advantage or disadvantage), including: • a method of analysing the product portfolio of a business in terms of market share and market growth Knowledge of an advantage of Boston matrix analysis (max 1 mark – annotate on left) including: • to analyse the breadth/specialisation of a business’s product portfolio • to enable business to move ? to stars • to ensure business to move stars to cash cows 2(c) • to enable business to launch new products • to enable business to avoid dogs Knowledge of a disadvantage of the Boston matrix analysis (max 1 mark- annotate on right), including: • withdrawal of dogs from the market unlikely to increase revenue • to move ? to stars will need more spending on marketing • to move stars to cash cows will also require more spending/increased costs • sudden changes in demand may not be accounted for • does not consider contribution to total revenue/profit • does not consider other factors affecting products • data can be inaccurate AO2 Application Context applied to an advantage (max 1 mark) and disadvantage (max 1 mark) of Boston matrix analysis, including: • products a and d cash cows • products b and c question marks • no stars • limited portfolio of products • forecast market growth of 25% over the next 5 years • cash cows account for 55% of total revenue AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. • product development essential for competition and survival • can inform investment decisions • simple framework to use • only considers market share and market growth so won’t be a complete analysis as to why products growing/declining • help eliminate poorly performing products, saving money in the long run • helps businesses understand current and future situations • identify new opportunities to ensure future growth/success • need to consider extension strategies for products • although a product might contribute most to revenue what product will replace this if it declines? 2(c) Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis To enable business to move ? to stars Such as product C Which is showing high market growth . so CCL could consider ways to increase product C’s market share Simple analysis which does not take Such as Product B’s forecast Which is higher than either of the two account of other factors contribution to total revenue cash cows so low market share may not need to be a concern 2(d) Evaluate the importance of operations to CCL’s added value. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion is relevant key term(s) relevant point(s) to that identifies made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key arguments. question. impacts and/or consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made with term(s) and/or to the business connections limited supporting comment/evidence. factor(s) is used to context. between causes, • An attempt is made to balance the answer the question. impacts and/or arguments. consequences. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 2(d) Indicative content AO1 Knowledge and understanding Knowledge of operations/added value (max 2 marks), including: • added value difference between price and costs • value added by the transformation process • produces outputs for customers • inputs used to create outputs • inputs are land, labour, capital and enterprise • outputs created in the manufacturing process • AO2 Application Context applied to CCL (max 2 marks), including: • coffee a growing market • many (5) processes involved in the transformation process • product differentiation • products in different quadrants in the Boston matrix analysis • same ingredient in differently labelled jars • taste important in coffee consumption • may contribute more to non-branded product AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. • helps to build the brand – increasing revenue/sales/profit • can add product features that customers want – attract new customers/increase customer loyalty • ensure quality – goods suitable for purpose • operate efficiently – cost effective • charge a higher price – increasing profits/value added • flexibility and innovation important – especially in a competitive/dynamic environment • protects market share and can increase it 2(d) AO4 Evaluation Limited evaluation - unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. A judgement whether operations does contribute to added value. • evaluation of the relative importance of operations as compared to e.g. marketing • elements that the evaluation/judgement might depend upon: – don’t know how efficient production is – other factors such as promotion may contribute more to added value – quality of the product important – design of packaging also contributes – convenience to customers important in creating added value – branding and product differentiation may be a greater contribution – difficult to measure contribution of operations Accept all valid responses. Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence with supporting evidence) context) evidence) Operations is very Operations is very important to CCL’s Operations is very important to CCL’s added value important to CCL’s added value as the quality of a product as the quality of a product helps determine the added value. helps determine the price that can be price that can be charged. Quality must be charged. ensured at each many processes involved in the transformation of coffee beans to ground coffee. Product differentiation Product differentiation may be more Product differentiation may be more important than may be more important than operations as good operations as good marketing is required to sell important than marketing is required to sell the products. the products, in the case of CCL each different operations. coffee product has the same ingredients.

Question 32

The Drink Company (TDC) TDC is a multinational carbonated drinks manufacturer with limited liability. TDC had budgeted that its annual reve…

Accepted Answer

2(a)(i) Identify one stage of the product life cycle. 1 Indicative content: Stages include: • Development/research/testing/initial design • Introduction/launch • Growth • Maturity/saturation • Decline. Accept only the answers above If more than one answer is given, only mark the first, reading from top left to bottom right. 2(a)(ii) Explain the term limited liability (line 1). 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. 2(a)(ii) Indicative content AO1 Knowledge and understanding Knowledge of limited liability (max 1 mark), including: • Limited liability is a legal status where a person’s financial commitment/responsibility is restricted to a fixed sum • Only a set amount of money invested is at risk • Personal assets are not at risk • Only business assets are at risk AO2 Application Explanation of limited liability (max 1 mark), including: • Protects shareholders/investors • Creates a separate legal identity (for a business) • Most commonly limited to the value of a person's investment • Can be linked to debt • Also applies to legal actions (i.e. suing a business) Context applied to limited liability (max 1 mark), including: • An example of a type of business that has limited liability, including: Private limited company (allow Ltd) Public limited company (allow PLC, Inc. or Corp) Limited liability partnership Incorporated business Accept all valid responses. Guidance in awarding marks Knowledge and Knowledge of limited liability 1 mark understanding Explanation Explanation of limited liability 1 mark Context Applied to a business context/business environment 1 mark 2(a)(ii) Exemplar and annotations Marks Rationale The most an owner could lose is the amount they invested 3 Clear knowledge of limited which protects investors within businesses such as private liability/risk, with the protection as limited company . explanation and a private limited company an example of a type of business that has limited liability. Shareholders personal wealth is protected because they can 3 The explanation comes first, only lose the sum of money that they invested , for example followed by the knowledge and an McDonalds has limited liability as a public limited company . example. TDC must be either a PLC or Ltd to have limited liability. Only 2 The example comes first, followed the amount invested is at risk . by the knowledge. Only the funds invested are at risk . 1 Knowledge only. Limited liability means that shareholders are protected in case of 0 There is no knowledge of limited financial difficulty. liability here, so no other marks can be awarded. 2(b)(i) Refer to Table 2.2 and other information. Calculate the variance between TDC’s budgeted revenue and actual 3 revenue for 2023. State whether the variance is favourable or adverse. Variance = actual revenue – budgeted revenue (1) $400m – $340m = $60m (1) Adverse (1) Answer = $60m adverse (3) $60m (award 2 marks – without adverse). Exemplar and annotations Marks 3 marks Correct answer Working, $ and millions (m) do not matter. $60m adverse (allow 60 adverse or 60 unfavourable or –60 adverse) Do not accept a minus sign (–) as adverse. 2 marks Correct calculation of size of variance (i.e. $60m To award two marks, there must be or –$60m) • Two and a OR OR • One , one and one An incorrect answer with one mistake allowing OFR for final stage. 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Identification of numbers (i.e. 400 and 340) 0 marks No creditable content. To award zero marks, there must be • One 2(b)(ii) Explain one possible benefit to TDC of using budgets. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a benefit of budgeting (max 1 mark), including: • Coordinates activities • To control finances/spending • To assist with planning • To monitor performance • Translate objectives into strategy. • Translate strategy into tactics. • Provide a record of organisational activities • Can improve communication • Improve resources allocation • Improve efficiency • Provides a tool for corrective action • Compare different areas of the business • To help achieve objectives. 2(b)(ii) AO2 Application Explanation of a benefit of using budgets (max 1 mark), including: • Coordinates activities; between functional areas of the business • To control finances/spending; by allocating appropriate resources to different areas of the business • To monitor performance; by doing a variance analysis • Translate objectives into strategy; to make sure the objective is met • Translate strategy into tactics; to make the strategy is implemented • Provide a record of organisational activities; for later comparison • Can improve communication/coordination; by giving financial targets • Improve resources allocation; by giving a quantitative target • Improve efficiency; by allocating finances to different areas of the organisation • Provides a tool for corrective action; when actual and budgeted are compared • Compare different areas of the business; to improve communication/coordination Context applied to a limitation of using budgets for TDC (max 1 mark) including: • Use of answer to Q2bi ($60m – OFR) • Revenue was $360m in 2023 compared with a budget of $400m. • TDC’s objective to reduce the cost of raw materials (by 2025) • TDC’s objective to increase market share by 10%.of B2C market (by 2025) • TDC’s product areas – VKola, Vtropical, VOrange and VLemon. • Use of Table 2.1 • Possible merger between HL and TDC • Use of Table 2.2 Accept all valid responses. Guidance in awarding marks Knowledge and understanding Knowledge of a benefit of using budgets 1 mark Explanation Explanation of a benefit of using budgets 1 mark Context Context linked to a benefit of using budgets 1 mark 2(b)(ii) Exemplar and annotations Marks Rationale A benefit of using a budget is that it allows a business to efficiently 3 A benefit showing knowledge and allocate its resources by allocating specific sums of money to then explained for the first APP. different products like TDC allocating money to VKola . The example is from the context so APP awarded. It helps TDC to monitor its own performance by doing a 3 A benefit showing knowledge and variance analysis to show adverse variances such as the then explained for the first APP. $60m revenue variance . The example is from the context so APP awarded. Provides a financial plan for each product like VOrange that 2 Knowledge and context, but no TDC produces explanation of how a financial plan is a benefit. Budgets can improve efficiency , and monitor performance and 1 There are three benefits here, but be used to help TDC achieve its objectives. all are only K. None are explained or contextualised. TDC has a $60m adverse variance when they did the budget. This 0 There is no knowledge of a benefit means that the revenue was lower than expected, which is bad for of budgets here, so the context TDC. cannot be awarded. 2(c) Analyse two ways in which TDC could use the Boston Matrix analysis in Table 2.1. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer points to a business • Limited analysis that the question. context. identifies connections • Knowledge of one relevant • Application of one relevant between causes, impacts point is used to answer the point to a business context. and/or consequences of question. two points. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2(c) Indicative content AO1 Knowledge and understanding Knowledge of uses of Boston Matrix , such as: • To analyse the breadth/specialisation of a business’s product portfolio • To manage/change its product portfolio • To Identify best/worst performing product • To identify opportunities for growth/investment • To identify opportunities for product development/new products • To allocate resources/budget effectively (between products) • To enable business to move ?/problem child to stars • To ensure business to move stars to cash cows • To enable business to launch new products • To enable business to avoid dogs • To help a business plan for the future sales/product development/achieve objectives The Boston Matrix is also referred to as the BCG Matrix. AO2 Application Context applied to a use of the Boston Matrix (max 2 marks), including: • Vkola – Star (high market growth, high market share) • VTropical – question mark/problem child (high market growth, low market share) • VOrange – Dog (low market growth, low market share) • VLemon – Cash Cow (low market growth, high market share) • Recent commissioned primary market research into TDC’s product portfolio • TDC’s objectives: to increase TDC’s profit margin by reducing the cost of raw materials to increase TDC’s market share of the business to consumer (B2C) market for carbonated drinks. • To provide data to HL about the business to facilitate the merger • Use of Table 2.2 • TDC is a multinational business 2(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Annotate first way on left and second way on right) Analysis of using the Boston Matrix, including: • To analyse the breadth/specialisation of a business’s product portfolio; only four products within TDC’s portfolio, may mean the business will need to increase its product portfolio – to increase sales. • To analyse the breadth/specialisation of a business’s product portfolio; to identify dogs for withdrawal from the market – unlikely to add to business revenue. • To enable business to move? to stars; to focus marketing spend on increasing VTropical’s market share (to a star) – to increase revenue – to increase profit. • To ensure business to move stars to cash cows; to reduce marketing spend on Vkola (to a cash cow) as the market has lower growth – to reduce costs – to increase profitability. • To enable business to launch new products – to replace VTropical as it increases its market share – to increase sales – to increase profit. • To enable business to avoid dogs; suggest that VOrange may be a dog and TDC should reduce marketing spend (or discontinue the product) – to decrease overall costs of TDC – increase profit. Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis To see which products are For example VOrange is a dog . Which may lead to TDC performing poorly . discontinuing VOrange and replacing it with a product which may have a larger market share To identify stars Like VKola Which will require high levels of promotion which may mean they develop into a cash cow for TDC. . 2(d) Evaluate whether the planned merger with HL will enable TDC to achieve its objectives. 12 Level AO1 Knowledge AO2 AO3 Analysis AO4 Evaluation and understanding Application 2 marks 6 marks 2 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed analysis Developed evaluation knowledge of application of that identifies • A developed relevant key term(s) relevant connections judgement/conclusion is made. and/or factor(s) is point(s) to the between causes, • Developed evaluative comments used to answer the business impacts and/or which balance some key question. context. consequences. arguments. 2(d) 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key application that identifies • A judgement/conclusion is made term(s) and/or of relevant connections with limited supporting factor(s) is used to point(s) to the between causes, comment/evidence. answer the question. business impacts and/or • An attempt is made to balance context. consequences. the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. Indicative content AO1 Knowledge and understanding Knowledge of mergers , including: • A type of business acquisition that describes the consolidation of two or more businesses or the assets of those businesses, including the joining of two firms, acquisition of a firm’s assets (including intellectual capital), consolidations, tender offers, purchase of inventory, and management combination. • Benefits of a merger, including: Shared resources May reduce costs Avoids duplication of resources Speedy way to grow Removes competition. Knowledge of business objectives , including: • Business objectives are the specific and measurable, achievable, resourced and time-based results that businesses hope to reach. About giving a business a direction. Business strategy enables a business to reach its objectives. 2(d) AO2 Application Context applied to TDC and HL merging (max 2 marks), including: • Use of Table 2.1, including: Vkola – Star VTropical – question mark VOrange – Dog VLemon – Cash Cow • Recent commissioned primary market research into TDC’s product portfolio • TDC’s objectives: To increase TDC’s profit margin by reducing the cost of raw materials To increase TDC’s market share of the business to consumer (B2C) market for soft drinks. • Table 2.2 data, including: $340m revenue for TDC and $280m for HL – combined revenue of $620m. $23.8m profit (7% profit margin) for TDC and $14m (5% profit margin) for HL – combined $37.8m profit (6.01% combined profit margin– not 12% profit margin) Reduces TDC’s end of year profit margin (as a percentage) assuming no cost savings. Likely to be cost savings by merging production facilities. Different target market segments; TDC convenience shops, supermarkets (retail) whereas HL sells to restaurants, events and hotels (commercial). TDC B2C whereas HL B2B. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Analysis of the impact of a merger on the objectives of a firm, including: • Objective to increase profit margin: Reduce cost of sales – combining production facilities – shared product of soft drinks – increase profitability. Reduce marketing costs – although different target markets, so may not be possible. Reduce overlap of managerial positions – especially middle management – increase profitability. Combination of brand names – may further reduce marketing costs – increase profitability. Opens up a new market B2B for TDC – increase sales – increase profit (but not profit margin). However, also likely to increase costs, including the actual costs of the merger – reduce profitability (in the short run). Unlikely to increase profit by % by the end of 2024 – year almost over. Do not have information about the product portfolio of HL – likely to be some overlap which may reduce profitability. 2(d) • Objective to increase market share: HL is targeting the B2B market – opens new market opportunities for TDC beyond the B2C market. By focussing on a new target market, TDC is unlikely to increase market share – more likely to reduce market share (as market size increases. Reduces the level of competition within the soft drinks market. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • A judgement whether the planned merger with HL will enable TDC to achieve either or both objectives (reduce profit/profit margin and increase market share). Judgement must be linked to objectives and/or TDC’s specific objectives). • Evaluation of the likelihood of the merger reaching one of the objectives (over the other). • Elements that the evaluation/judgement might depend upon – external environment, economic conditions, competitive structure of the soft drinks market, timescale of the objectives, strategies already implemented by the Board of Directors, product portfolio of HL etc. Accept all valid responses. 2(d) Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) Yes, the merger will help TDC Yes, the merger will help TDC Yes, the merger will help TDC achieve its objective achieve its objective by quickly achieve its objective by quickly increasing productive capacity increasing productive capacity enabling it to increase its sales. enabling it to increase its sales and market share. No, it won’t help TDC achieve its No, it won’t help TDC achieve its No, it won’t help TDC achieve its objective objective because the businesses objective of increasing market do not have the same target share because the businesses do market. not have the same target market. Whether the merger will help Whether the merger will help Whether the merger will help achieve the objectives depends on achieve the objectives depends on achieve the objectives depends on TDC having the finance to fund the TDC having the finance to fund the TDC having the finance to fund the merger. merger, such as the money to merger, such as the money to make some unnecessary make some unnecessary employees redundant. employees redundant, if the combined target market remains B2C, then some of HL’s sales employees might be redundant.

Question 33

Vegan Burger (VB) VB is an established vegan burger chain in country X. Its Unique Selling Point (USP) is high quality, good value vegan me…

Accepted Answer

2(a)(i) Identify one feature of a franchise. 1 Indicative content Knowledge of one feature of a franchise including: • the legal right/contract for another business to use the: name; logo; marketing methods • need to follow franchisor’s requirements • franchise fee • share of profits (royalty fee) to franchisor • trades under an established brand name • franchisee has access to training/support • franchisee cannot make decisions without franchisor’s approval Accept all valid responses. 2(a)(ii) Explain the term market share (line 6). 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content Responses may include: • formula (2 marks) sales of the business/product market share =  100 total market sales AO1 Knowledge and understanding • the sales of a specific business/product AO2 Application • comparison to the sales in the total market Application to a business context: • way of comparing the size of a business against its competitors • shows the amount of ‘power/influence’ that the business has in the market/market dominance 2(a)(ii) • an increased market share gives the business more power, e.g. price setter • the business with the highest market share is the market leader • selling 25 franchise licenses helped VB increase its market share in country X • VB added vegan pizza to its menu to gain a higher market share of the fast-food market • example of a market leader to illustrate market share, e.g. Tesco is the market leader of the UK supermarket industry so has the highest market share Application can be made to VB or any other scenario/context/business/person. Allow application to market share. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of market share 1 mark Explanation Explanation of market share 1 mark Context Applied to a business context/ business environment 1 mark 2(b)(i) Refer to table 2.1. Calculate VB’s breakeven level of output per month per restaurant. 3 Indicative content 1 mark for the formula for breakeven (words or figures) OR correct calculation for the contribution per unit 1 mark for formula for breakeven (words or figures) AND calculating the contribution per unit 1 mark for calculating the breakeven level of output per month per restaurant (OFR) • formula: fixed costs / contribution per unit (1) • calculation of fixed costs and contribution per unit (1) – fixed costs: $1000 – contribution per unit: selling price per unit ($6) – variable cost per unit ($2) $4 • calculation of the breakeven level of output per month per restaurant – $1000/$4 – BE level of output: 250 per month (1 OFR) • answer = 250 (units) (3) Accept all valid responses. 2(b)(i) Marks 3 marks Correct answer Working and units do not matter. 250 (units) allow 250 Must be three to denote the three marks. 2 marks Both of the following: To award two marks, there must be Correct formula for the breakeven output (words or • Two and a figures) OR AND • One , one and one Correct calculation of the contribution per pizza OR An incorrect answer for the breakeven output with one mistake allowing OFR for final stage. 1 mark One of the following: To award one mark, there must be: Correct formula for the breakeven output (words or • One and two figures) OR Correct calculation of the contribution per pizza 0 marks No creditable content. To award zero marks, there must be • One 2(b)(ii) Explain one reason for VB to have accurate cost information. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding • to calculate profit or loss • to make pricing and business decisions • to predict cashflow • to measure performance • to set budgets • to allocate resources AO2 Application Explanation of a reason for VB to have accurate cost information • APP can be awarded for development of the AO1 point, e.g. – to calculate profit or loss; requires a business to know its costs/revenues – to make pricing and business decisions; so that costs are covered – to predict cashflow; by considering accurate outflows – to measure performance; by analysing how costs change over time – to set budgets; in line with predicted expenditure – to allocate resources; so that the business knows what it is paying out for 2(b)(ii) Context applied to VB of a reason for accurate cost information: • each pizza is sold for $6 with a contribution of $4 • fixed costs per month of $1000 • breakeven output is 250 pizzas per month • any data from Table 2.1 • objective changed from developing brand awareness to increasing market share • franchise • Patel’s Pizza is a competing business • VB ran a six-month national television marketing campaign to promote the new vegan pizza Application for the second APP mark must be made to VB and not generic. Accept all valid responses. Guidance in awarding marks Knowledge and understanding Knowledge of a reason for accurate cost information 1 mark Explanation Explanation of a reason for accurate cost information 1 mark Context Applied to a business context/business environment 1 mark 2(c) Analyse two benefits for VB of on-the-job training. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections between used to answer the business context. causes, impacts and/or consequences of two points. question. • Application of one • Limited analysis that identifies connections between • Knowledge of one relevant point to a causes, impacts and/or consequences of one point. relevant point is business context. used to answer the question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2(c) Indicative content AO1 Knowledge and understanding Knowledge of on-the-job training (max of 1 mark if no benefit of on-the-job training) Knowledge of benefits of on-the-job training (max 2 marks – annotate first benefit on left and second benefit on right) including: • provided by managers or experienced colleagues – so trainers use first-hand experience to train • methods include demonstration/instruction/coaching/job rotation • low cost/off-the-job training is not needed • learn while doing the actual job • employee will produce output whilst training • training in a live/real situation • training tailored to working at VB • the employee will get to know colleagues • the employee will learn about the organisational culture AO2 Application Context applied to a benefit for on-the-job training (max 2 marks), including: • breakeven output is 250 pizzas per month • any data from Table 2.1 • objective changed from developing brand awareness to increasing market share • franchise • vegan pizza has been sold by VB for two years • each restaurant sells on average 500 pizzas and 4500 burgers per month • Patel’s Pizza is a competing business • VB ran a six-month national television marketing campaign to promote the new vegan pizza 2(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. • on-the-job training is cheaper than off-the-job training; low risk – increase profits • utilise trainers from within the business; motivates the employees chosen to do the training – increased productivity/reduced labour turnover • increases productivity; employees trained while working – increases revenue/profits • tailored to the needs of VB; trains on the specific machinery used/menu served – less induction training needed • trainee will get to know colleagues whilst training; better team working – better customer service/customer satisfaction Accept all valid responses. 2(d) Evaluate whether VB should continue to market vegan pizza. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion is relevant key term(s) relevant point(s) to that identifies made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key arguments. question. impacts and/or consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made with term(s) and/or to the business connections limited supporting comment/evidence. factor(s) is used to context. between causes, • An attempt is made to balance the answer the question. impacts and/or arguments. consequences. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 2(d) Indicative content AO1 Knowledge and understanding Knowledge of marketing (max 2 marks), including: • the marketing mix (four Ps) – getting the right product at the right price to the right place and making customers aware of it using the right promotional methods • market research • the nature of marketing AO2 Application Context applied to features of marketing (max 2 marks), including: • established vegan burger chain – USP for high quality, good value vegan burger meals • featured on a documentary for successful entrepreneurs in country X • breakeven output is 250 pizzas per month • any data from Table 2.1 • objective changed from developing brand awareness to increasing market share • franchise • primary market research two years ago found pizza was a popular fast food • vegan pizza has been sold by VB for two years • each restaurant sells on average 500 pizzas and 4500 burgers per month • profit for vegan pizza is $1000 per month ($500 per month  4 = $2000 – $1000 fixed cost) • Patel’s Pizza is a competing business • VB ran a six-month national television marketing campaign to promote the new vegan pizza AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Possible impacts of continuing to market vegan pizza, including: • pizza is a popular fast food – VB has a USP for high quality, good value vegan meals – may gain a higher market share – increase revenues 2(d) • VB restaurants sell 500 pizzas per month – loyal customers – removing the vegan pizza from the menu may upset loyal customers – could reduce overall sales revenue • Patel’s Pizza may capitalise on the vegan trend – pizza is their USP – VB may lose market share – reduce overall profits • changing to hot desserts means that the pizza ovens need to be repurposed – expensive to change – reducing profits • demand for hot desserts is unknown whereas two years ago primary market research stated that pizza was a popular fast food – little demand for hot desserts – reduced sales revenue Possible impacts of not continuing to market vegan pizza, including: • VB vegan pizzas need more marketing to be successful – increased cost – reduced profitability (if revenue does not increase by a sufficient amount to offset the increased cost) • 90% of VB’s sales are burgers – pizza only accounts for 10% of sales – pizza reduces brand identity – reduced market share • hot desserts complement the main burger meal – increased demand for burgers as customers can enjoy a complete meal – increased market share • market share/investment into marketing campaign for pizza is lost – reduces offering – could lead to a negative impact on entrepreneurial success – impact on personal reputation • new marketing campaign may be needed to support the launch of the hot desserts – may be added to the franchise fee – could lead to loss of franchises – reduction in the number of outlets AO4 Evaluation Limited evaluation - unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • a judgement over whether VB should continue to market vegan pizza. • a judgement over the most likely/important impacts of continuing/not continuing to market vegan pizza • what the judgement might depend upon, including the importance of current trends, levels of customer loyalty, impact on USP and reputation, impact of competition, appetite of franchisees for more training costs/increased marketing, impact of potential loss of reputation Accept all valid responses. 2(d) Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence with supporting evidence) context) evidence) VB should continue VB should continue to market vegan VB should continue to market vegan pizza because it to market vegan pizza because it has spent money has spent money purchasing pizza making equipment pizza. purchasing pizza making equipment in in each of its restaurants which would be wasted if it each of its restaurants which would be withdrew from the market. The business currently sells wasted if it withdrew from the market. 500 pizzas per month which is likely to grow as it takes more than two years to become an established pizza seller. VB should not VB should not continue to market vegan VB should not continue to market vegan pizza and sell continue to market pizza and sell hot desserts which hot desserts which complement the main burger meal vegan pizza. complement the main burger meal and and therefore attract new customers seeking a therefore attract new customers seeking complete meal to VB. Patel’s Pizzas is more popular a complete meal to VB. and VB cannot compete with this business. Whether VB Whether VB continues to market vegan Whether VB continues to market vegan pizza depends continues to market pizza depends upon its level of upon its level of experience. VB is experienced in vegan pizza experience. VB is experienced in vegan vegan food. The capital expenditure for pizza making depends upon its food. equipment was low so the business will not lose a lot level of experience. of money by withdrawing from the pizza market.

Question 34

Natural Shampoos (NS) NS is a private limited company set up by Saira and Chantal as a social enterprise. NS sells natural hair care produc…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one feature of a private limited company. 1 Indicative content Identification of a feature may include: • Owned by shareholders • Cannot sell shares on the open market / stock market • Sell shares for family/friends • Can raise extra capital by selling shares • Limited liability • Continuity of operations • Legal personality • Incorporation If more than one answer is given, only mark the first, reading from top left to bottom right. Do not reward vague points that apply to any private sector organisation, including a private limited company, e.g. not owned by government. 1(a)(ii) Explain the term customer (market) orientation 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of customer orientation will include (max 1 mark): • Knowledge of customer, including: – Purchaser/buyer (accept consumer/end-user/target audience) – Who they sell to – Demand-based (accept demand) OR • Knowledge of orientation, including: – Focused on customer/purchaser/buyer/consumer/end-user/market – Customer at the heart/centre – Satisfying their needs – Outward looking approach AO2 Application Explanation of customer orientation will include (1 mark): • Knowledge of customer, including: – Purchaser/buyer (accept consumer/end-user/target audience) – Who they sell to – Demand-based (accept demand) 1(a)(ii) AND • Knowledge of orientation, including: – Focused on customer/purchaser/buyer/consumer/end-user/market – Customer at the heart/centre – Satisfying their needs – Outward looking approach Context applied to customer orientation , including (max 1 mark): • Any example of customer orientation, including: – Putting the customer at the centre of decision making – An example of a customer orientated decision – Methods of identifying customer wants/needs, e.g. customer feedback / specific requests on NS’s blog / sales data – Benefit of customer orientation, e.g. increased customer satisfaction, market leadership Accept all valid responses. Exemplar and annotations Mark Rationale Buyers are at the centre of operations . By 3 An answer which starts with the knowledge and then responding to customer requests on its blog NS applies it to customer demand and NS. was able to decide what products to expand its range with. Basing product decisions on purchaser demand 3 Again, knowledge first, followed by application to a . A business could decide which products to make decision (production) and to the demand (market , in response to market research. research data). Focused on the buyer . 2 Clear knowledge. Some application Managers think about purchasers’ needs . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. It is about choices that have to be made by a 0 No knowledge of customer orientation. Too vague. business, for example how to allocate resources. 1(b)(i) Refer to Table 1.1. Calculate NS’s capacity utilisation in 2024. 3 Indicative content Current output level Rate of capacity utilisation =  100 (1 mark – formula only) Maximum output level 145000 NS capacity utilisation =  100 (1 mark – use of correct figures in formula) 150000 Answer = 96.67(%) or 96.7 or 97 (3 marks – correct answer no working or % needed) OFR applies Exemplar and annotations Marks 3 marks Correct answer (including minus) Working and % do not matter. 96.67(%) or 96.7 or 97 Must be three to denote the three marks. 2 marks Two of the following: To award two marks, there must be • Correct formula • Two and a • Correct identification of figures OR OR • One , one and one An incorrect answer with one mistake allowing OFR for final stage. OR Correct workings, but the final answer is incorrectly rounded 1(b)(i) Marks 1 mark Correct formula To award one mark, there must be: • One and two 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one possible disadvantage to NS of high capacity utilisation. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Identification of a disadvantage of high capacity utilisation (max. 1 mark), including: • Pressure on employees to work at full/near capacity constantly (accept anxiety / stress / need to work overtime) • Pressure to keep employees motivated • No margin for production errors / scheduling mistakes • Cannot accept increased/additional orders • No time for maintenance of machinery / machines break down a lot • Over-production (accept inventory going off before it can be sold) • Low inventory of inputs/raw materials / run out of materials • No space left for finished product • Not sustainable in the long-term AO2 Application • Explanation of a disadvantage of high capacity utilisation (max 1 mark), including: • Pressure on employees to work at full/near capacity constantly – increased employee absenteeism / demotivation / increased labour turnover – reduced productivity long-term 1(b)(ii) • No margin for production errors / scheduling mistakes – may lead to customer dissatisfaction due to lower quality • Cannot take on increased/additional orders – may lead to customer dissatisfaction / customers may go to competitors who are able to accept increased/additional orders • Machines break down a lot – no output Context applied to NS (max 1 mark), including: • Answer to Q1(b)(i) (OFR) • Market leader for natural hair care • Five years since John’s investment • Sold in major retailer • Private limited company operated as a social enterprise • Focuses on customer (market) orientation • Aim to donate to local charities and improving gender equality in the workplace Accept all valid responses. Exemplar and annotations Mark Rationale A disadvantage would be high pressure on 3 High pressure is a reasonable factor, explained in employees , due to lack of spare capacity the specific context of NS by using the data in Table because NS is working at 97% capacity . 1.1. There is insufficient time for maintenance , as 3 Lack of maintenance time is and there are two machines are always working which could cost specific pieces of context based on this so two . NS the title of market leader . NS is market leader and capacity utilisation is 3 Although the appears first, it cannot be awarded already at 97% so NS may have to refuse other until the has been found. However, there is obvious , so you can go back and award the . large orders . 1(b)(ii) Exemplar and annotations Mark Rationale There is no margin for errors in production to its 2 No margin for error is . The context to major retail major retail customers . customers is reasonable , but only one point of application. Regular customers cannot increase their orders if 1 Cannot increase orders is a factor. The rest of the demand increases which could be a huge answer is not applying it to the context, so (Not opportunity cost in terms of future sales. Answering Question). Capacity utilisation is the proportion of maximum 0 Although there is some relevant context, there is no output capacity currently being achieved, currently knowledge of a factor, so no marks can be awarded. 97%. It shows the total possible sustained output of a business in a given time period. It is a major factor in determining the operational efficiency of a business which in this case is very high . 1(c) Analyse two selection methods that NS could use to choose a new Marketing Manager. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is used relevant points to a • Limited analysis that identifies connections to answer the business context. between causes, impacts and/or consequences question. • Application of one of two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is used business context. between causes, impacts and/or consequences to answer the of one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Annotate Method 1 in the left hand side column, method 2 in the right hand side column 1(c) Indicative content AO1 Knowledge and understanding Identification of a method of selection (max 2 s), including: • Curriculum vitae (CV) • Résumé • Application forms • Interviews • References • Testing • Assessment centres • Role play • Presentations • Appraisal records Note: A selection method is about the candidate, rather than the process the employer uses, e.g. shortlisting, screening or sifting. AO2 Application Max one for application in the first selection method and max one for application in the second selection method. Application of the selection method to NS for the new Marketing Manager (max 2 s), including: • Market leader for natural hair care • Five years since John’s investment • Sold in major retailer • Private limited company operated as a social enterprise • Focuses on customer (market) orientation • Aim to donate to local charities and improving gender equality in the workplace • Expanded its range slowly based on customer feedback, specific requests on its blog, and sales data. • NS products are now sold in major cosmetic retailers 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. • Curriculum vitae shows the applicant has required skills; reduces training costs / increases productivity – increasing profitability • Application forms show required experience; all information is on the form so managers can save time when selecting candidates – this time can be used to make other operational decisions • Interviews show understanding of aims; candidate understands what the business is aiming to achieve to do – which helps the aims to be met • References provide proof of experience; improves customer service leading to customer satisfaction – increased market share Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Curriculum vitae . Proves experience of working in a Enabled trust in candidates’ abilities customer orientated industry which can be used in promotion to approach more cosmetic retailers . Assessment centres Can check whether values align with To continue to improve gender the values of the social enterprise equality and avoid costly marketing mistakes from a lack of knowledge and experience. Cost reduction will lead to increased profits . 1(d) Evaluate the most likely reason for conflict to arise between the owners of NS 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to the that identifies connections • A developed and/or factor(s) is used to business context. between causes, impacts judgement/conclusion answer the question. and/or consequences. is made. • Developed evaluative comments which balance some key arguments. 1(d) Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies connections • A judgement/ and/or factor(s) is used to business context. between causes, impacts conclusion is made answer the question. and/or consequences. with limited supporting comment/evidence. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of likely reasons for conflict to arise (max 2 s), may include: • Aims / objectives / vision / mission • Idea / suggestions • Personal disagreements (brought into the workplace) • Communication • Speed of expansion • Cultures • Leadership styles / power • Choice of employees • Part-ownership / loss of control • Change of business ownership, e.g. move from private limited to public limited company 1(d) • Finance • Personality (clash) / morale • Experience / job roles • Location AO2 Application Limited application applies knowledge of NS aims and objectives and/or stakeholder groups once. Developed application + applies knowledge of NS aims and objectives and/or stakeholder groups twice. • Market leader for natural hair care • Five years since John’s investment • Sold in major retailer • Private limited company operated as a social enterprise • Focuses on customer (market) orientation • Aim to donate to local charities and improving gender equality in the workplace • Use of data from Table 1.1 • NS expanded its range slowly, based on customer feedback, sales data and specific requests on its blog • NS products are now sold in major cosmetic retailers • John’s main aim is to increase long-term profits to maximise return on investment AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. • Aims/objectives; differing objectives may lead to fewer charitable donations – reduce marketing opportunities • Idea/suggestions; longer decision making due to disagreements – competitors launch a new product before NS • Communication; employees are given different instructions by different owners causing employee confusion and productivity reductions – leading to less profits • Speed of expansion; one owner wants quicker expansion which the other owner does not want, leading to inefficiency – reducing profits • Cultures; the culture of the two owners differ leading to inefficiency – increasing costs • Choice of employees; the orientation may be lost leading to poor decision making – less profit • Loss of control; the original owners’ aims may not be considered in decision making – reducing customer satisfaction Note: Accept answers about an impact on either the owners or NS. 1(d) AO4 Evaluation Limited evaluation – an unsupported judgement and/or weak attempt at an evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context . • Relative importance of aims and objectives – are other issues more important, e.g. potential personal income, the opportunity to take the brand to an international market • The likely impact on the business’s performance / achievement of aims and objectives • The likely impact on different stakeholders • A judgement on the most likely reason for conflict between the owners of NS Accept all valid responses. Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) The most likely reason is the differing The most likely reason is the differing The most likely reason is the differing aims of the owners. aims of the owners, increasing the aims of the owners, increasing the time to make decisions. time to make decisions, leading to the loss of market leadership. NS has grown very quickly which NS has grown very quickly which NS has grown very quickly which could cause the greatest conflict. could cause the greatest conflict. This could cause the greatest conflict. This could lead to diseconomies of scale. could lead to diseconomies of scale which could lead to reduced long-term profits disappointing John.

Question 35

Crafty Toys (CT) CT is a co-operative that produces and sells a range of wooden toys, such as puzzles, cars and dolls. The co-operative was…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one feature of a co-operative. 1 Indicative content Identification of a feature may include: Responses may include: • Owned/controlled by members • Shared decision making • Shared profits/losses • Run for the mutual benefit of members • All members contribute/participate • Mutual objectives Accept all valid responses. 1(a)(ii) Explain the term traditional manager functions. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. Indicative content Responses may include: AO1 Knowledge and understanding Knowledge of traditional manager functions may include (max 1 mark): • Planning • Organising • Directing • Controlling AO2 Application Explanation of traditional manager functions may include (max 1 mark): • Planning – involves setting objectives and determining the best course of action to achieve them. • Organising – the process of arranging resources and tasks to achieve the organisation's goals. • Directing – leading and motivating employees to achieve organisational goals • Controlling – the process of monitoring and evaluating performance to ensure that organisational goals are met. Context applied to traditional manager functions , including (max 1 mark): • Without these management functions businesses may not survive/thrive/achieve success • Examples of businesses/types of businesses/types of managers. Accept all valid responses. 1(b)(i) Refer to Table 1.1. Calculate the labour productivity for CT in 2024. 3 Indicative content. Formula for productivity: Output per person per hour Productivity = output / total labour hours (1) Output = 54 000 Labour hours = 12  1800 (1) = 21 600 (1) 54 000 / 21 600 (2) = 2.5 OR (54 000 / 1800) / 12 (2) = 2.5 OR (54 000 / 12) / 1800 (2) = 2.5 Answer = 2.5 units or 2.5 (3) OR Formula for productivity: Productivity = output in a given time period/total workers (1) 54 000 / 12 (1) = 4500 Answer = 4500 (3) Note: Correct Formula + 54 000 / 1800 = 30 (2), no formula 1 mark 1(b)(ii) Explain one advantage to CT of labour-intensive operations. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Knowledge of an advantage of labour-intensive operations. : • customised products easier to make • less capital investment required • employees can use own initiative • employees can offer new ideas • flexibility/adaptability • high quality products • employees can build up relationship with customers • sustainability 1(b)(ii) AO2 Application 3 Explanation of an advantage of labour-intensive operations (max 1 mark), including: • customised products easier to make – so can satisfy customer requirements • less capital investment required – lower machinery costs/set-up costs • employees can use own initiative – so employees can problem solve • employees can offer new ideas – help increase growth/demand • flexibility/adaptability – firms can more easily adjust the number of employees/reassign tasks • higher quality products – more attention to detail/quality control • employees can build up relationship with customers – retain customer loyalty • sustainability – less emissions Context applied to CT (max 1 mark), including: • Use of answer to 1bi (OFR) • Employee co-operative • Hand-made products • Competitive market • Low level of demand • Aim to produce high quality toys • Ethical/eco-friendly materials Accept all valid responses. 1(c) Analyse two methods of primary market research CT could use to identify customer wants. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two relevant Limited analysis relevant points is points to a business • Limited analysis that identifies connections used to answer the context. between causes, impacts and/or question. • Application of one relevant consequences of two points. • Knowledge of one point to a business • Limited analysis that identifies connections relevant point is context. between causes, impacts and/or used to answer the consequences of one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Annotate the first method in the left-hand margin and the second in the right-hand marking. 1(c) Responses may include: 8 AO1 Knowledge and understanding Knowledge of the methods of primary research used to identify customer wants. • surveys • questionnaires • internet forums • tracking online behaviour/website analytics/e-commerce data • product sampling • focus groups • interviews • observations • social media Note: Qualitative/quantitative are types of primary research not methods AO2 Application Max one for application in the first method and max one for application in the second method. Application of knowledge of a method of primary research to CT (max 2 s), including • CT could use own website/social media to survey customers • Ask for customer ratings/feedback on website • Get feedback at trade fairs / exhibitions • Use loyal customer base e.g. face to face interviews • Ask the independent retailers on trends/best-selling items/how children interact with the toys 1(c) AO3 Analysis 8 Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. • Surveys – help gather information on customer preferences, satisfaction levels, and specific needs – to develop products • Questionnaires – can be structured, semi-structured, or unstructured – allowing for detailed feedback • Internet forums/tracking online behaviour/website analytics/e-commerce data – helps understand customer preferences and purchasing patterns – so can satisfy those wants/needs. • Product sampling – immediate feedback from customers about the product's feel, quality, and overall appeal. • Focus groups – provides qualitative insights into customer attitudes, motivations, and perceptions– but are toys suitable for focus group of adults? • Interviews – can be structured, semi-structured, or unstructured, allowing for detailed feedback • Observations – helps identify usage patterns – and areas for improvement • Social media – provides real-time insights into customer opinions and trends – current/up-to-date opinions • Primary research methods – could help identify likely customer wants – but expensive • Niche markets have low demand – less secondary information available • Loyal customers – more likely to provide answers – may give biased answers Accept all valid responses. 1(d) Evaluate whether CT should change to flow production. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of relevant that identifies • A developed and/or factor(s) is used point(s) to the business connections between judgement/conclusion is made. to answer the question. context. causes, impacts and/or • Developed evaluative consequences. comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to that identifies • A judgement/conclusion is and/or factor(s) is used the business context. connections between made with limited supporting to answer the question. causes, impacts and/or comment/evidence. consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable No creditable response. No creditable response. response. 1(d) Responses may include: 12 AO1 Knowledge and understanding Knowledge of flow production and/or labour-intensive (handmade) (max 2 s), including: Flow production: • continuous/mass production • involves the continuous movement of items through the production process • usually on an assembly line/using repetitive process • capital intensive • fewer workers required/uses less-skilled labour • standardised products Labour-intensive/handmade production: • artisanal or craft production • involves the creation of products by hand • minimal use of machinery • requires skilled labour AO2 Application Limited application applies knowledge of production method to CT once. Developed application + applies knowledge of production method to CT twice • Reputation for ethical products • Long lead time • Requires skilled workers • High costs of production • 4500 per year per worker/2.5 units produced per worker per hour • Quality products 1(d) AO3 Analysis 12 Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis • Change of working practices –De-skilling • Long term futures assured – can increase productivity/reduce lead time • Business expands – increase profitability • Increased ability to compete – through lower costs/could lower prices • Lose USP – customers go to other businesses • Low level of demand – change will not impact this unless lower prices • Reduce costs – lower skilled labour required/paid less • Requires investment – finance might be difficult to source • Lower quality – less attention to detail • Some members may be unhappy with the change – could cause conflict AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. Whether CT should use flow production depends on several factors: • Scale of production – If CT needs to produce large quantities of standardised products, flow production is highly beneficial due to its efficiency and economies of scale. • Investment capacity – Can CT afford the high initial setup costs and ongoing maintenance of automated systems? • Product type – Flow production is ideal for products that do not require customisation and can be produced in large volumes, which is not CT’s current situation. • Market demand – If there is consistent high demand for the product, flow production can meet this demand effectively, but CT faces low demand • Member considerations – CT should consider the impact on member motivation and find ways to mitigate the negative effects of repetitive tasks. 1(d) • Market competition – CT will face higher competition than in a niche market 12 • Expensive – Will require investment in capital/machinery which CT may not have the finance to do • Costs increase – Initial costs very high but in the long-run could lower unit costs • Brand reputation – Might damage the brand reputation for ethical, high quality toys • Loyal customers – Might lose loyal customer base including the independent retailers • A recommendation whether CT should change to flow production In conclusion, flow production is advantageous for large-scale, standardised production with high demand and sufficient investment capacity. However, CT must weigh these benefits against the potential drawbacks, such as high setup costs and low member motivation, to determine if it aligns with their specific needs and goals. Accept all valid responses.

Question 36

Fresh Farm (FF) FF is a partnership in country Q that grows a range of fruits and vegetables, such as apples, carrots and potatoes. FF also…

Accepted Answer

2(a)(i) Identify one feature of a partnership. 1 Indicative content Identification of a feature of a partnership may include: • Two or more people join but the exact number can vary depending on the type of partnership and legal regulations • Unlimited liability • Share profits / losses / risks • Must have mutual trust and confidence in each other • Formalised through a legal agreement • Decisions usually made collaboratively / each partner has a say in the business operations 2(a)(ii) Explain the term working capital. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Knowledge of working capital (max 1 mark), may include: • Financial measure • Difference between current assets and current liabilities • A measure of a company's liquidity and short-term financial health • Day-to-day finance required AO2 Application Explanation of working capital (max 1 mark), including: • ensures firm can meet short-term liabilities • indicates liquidity • assesses how efficiently a company is using its resources to generate revenue • can be used as a source of finance • Context applied to working capital (max 1 mark), including: • companies with positive working capital can invest in growth opportunities and expansion • example/calculation Accept all valid responses. 2(b)(i) Refer to Table 2.1. Calculate FF’s profit in 2024. 3 Indicative content • Formula: price = revenue – (direct costs + fixed costs) (1) • Calculation of total costs $50 000 + $30 000 = $80 000 (1) • Calculation of profit = $120 000 – $80 000 (2) = $40 000 (3) 40 (with working) = 2 Answer = $40 000 (3) 2(b)(ii) Explain one factor influencing the supply of FF’s products. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Knowledge of a factor influencing supply may include: • Price of the product • Production costs • Technology/capacity • Number of suppliers • Government policies • Season/harvest/weather conditions • Prices of substitutes/complements • Future expectations • Productivity of workers AO2 Application Explanation of a factor influencing supply (max 1 mark), including • Price of the product – When the price of a product increases, producers are generally willing to supply more because they can achieve higher revenue/vice-versa • Production costs – A decrease in production costs (e.g., lower wages, cheaper raw materials) can increase supply as it becomes more profitable to produce/opposite for an increase in costs 2(b)(ii) • Technology/capacity – Improvements in technology can enhance production efficiency, leading to an increase in 3 supply/availability of spare capacity • Number of suppliers – An increase/decrease in the number of suppliers in the market can lead to a higher/lower overall supply • Government policies – effect of subsidies/taxes • Season/harvest/weather conditions – good harvest/weather conditions can increase the supply of agricultural products. Poor harvest/weather conditions can reduce supply • Prices/availability of substitutes/complements – If the price of a substitute good rises, producers might switch to producing that good, reducing the supply of the original product. An increase in the supply of a complementary good can also increase the supply of the original product • Future expectations – If producers expect higher prices in the future, they might reduce current supply to sell more later at higher prices/if lower prices are expected, producers might increase current supply to sell more before prices drop • Productivity of workers – Increased worker productivity can lead to higher supply as more goods are produced in the same amount of time/decreased productivity can reduce supply Context applied to FF’s supply of products (max 1 mark) including: • Low level of supply • Can only grow a limited number of crops • Seasonal produce • Yield and quality affected by weather conditions • Labour intensive • Competitive market • Customers require fresh, varied and consistent products Accept all valid responses. 2(c) Analyse two benefits to FF of product differentiation. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two relevant Limited analysis relevant points is used points to a business • Limited analysis that identifies to answer the question. context. connections between causes, impacts • Knowledge of one • Application of one relevant and/or consequences of two points. relevant point is used to point to a business • Limited analysis that identifies answer the question. context. connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2(c) Annotate the first benefit in the left-hand margin and the second in the right-hand marking. 8 AO1 Knowledge and understanding Knowledge of benefits of product differentiation (max 2 s), may include: • Greater choice • Responsive to customer wants • Meets customer requirements • Reduce the impact of seasonal products. • Create a strong brand image • Spread risk • Increase price/revenue/profit/added value • Expand customer base/loyalty • Improve competitiveness AO2 Application Max one for application in one benefit and max two for application in two benefits • Loyal customers • Customers want fresh and varied products throughout the year • FF a reliable brand • Appeals to customers who want natural products • Customers appreciate quality, flavour and nutrition of products • High demand • Competitive market AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. • FF can expand market share – differentiation can attract a specific segment of the market, increasing the FF's overall market share/help it to grow • Seasonal products – could ensure year around production • Increase finance – able to re-invest in the business • Competitive Advantage – helps create a unique selling proposition, making the product stand out from competitors • Brand loyalty – highlighting unique features, FF can build brand loyalty and encourage repeat purchases 2(c) • Price flexibility – differentiated products can often command higher prices because consumers perceive them as 8 offering greater value • Reduced price sensitivity – customers may be less sensitive to price changes if they believe the product offers unique benefits • Niche markets – allows FF to target niche markets with specific needs and preferences • Customer satisfaction – meet specific customer needs, leading to higher customer satisfaction • Brand Identity – strong differentiation helps in building a distinct brand identity that is hard for competitors to copy Accept all valid responses. 2(d) Evaluate whether business growth is a suitable objective for FF. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of that identifies • A developed and/or factor(s) is used relevant point(s) to connections between judgement/conclusion is made. to answer the question. the business causes, impacts • Developed evaluative context. and/or consequences. comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key term(s) application that identifies • A judgement/conclusion is and/or factor(s) is used of relevant point(s) connections between made with limited supporting to answer the question. to the business causes, impacts comment/evidence. context. and/or consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable No creditable No creditable response. response. response. 2(d) Indicative content 12 AO1 Knowledge and understanding Knowledge of business growth/methods of business growth/objectives (max 2 s), including: • The process of improving some measure of an enterprise's success. • Can be achieved through various strategies • The increase in the size, revenue, market share, or profitability of a business over time. • Can be measured in different ways • External/internal growth • Organic growth • Mergers / joint ventures • Strategic alliance Objectives • Business objectives are specific, measurable goals that an organisation aims to achieve within a certain timeframe • Provide direction and a clear focus for the company's efforts and resources. • Guide decision-making • Help allocate resources effectively • Used to measure the success of various initiatives. AO2 Application Limited application applies knowledge of growth/methods of business growth to FF once. Developed application + applies knowledge of growth/methods of business growth to FF twice • Limited production capacity • High level of demand • Labour-intensive • Ethical approach – organic methods / renewable energy sources • Highly competitive market • Impacted by weather conditions • Affected by pests, diseases and natural disasters Expectations of customers for fresh, varied and consistent products/quality, flavour and nutrition 2(d) AO3 Analysis 12 Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. • allows a business to increase profits – reduce costs by using external resources • can improve quality, efficiency or productivity – using experienced providers • reduce risks or liabilities – share with other firms • compromise the quality and consistency of FF’s products – lose customers • expose FF to more risks and uncertainties – such as reliability, delivery delays, contractual disputes etc • increase costs – may not be able to afford internal growth • increased market share – growth can help FF capture a larger share of the market, enhancing its competitive position • economies of scale – as businesses grow, they can achieve economies of scale, reducing the cost per unit of production and increasing profitability • diversification – growth often allows businesses to diversify their product lines or enter new markets, spreading risk and creating new sources of revenue • resource constraints – rapid growth can strain an organisation’s resources, including finances, personnel, and infrastructure • quality control – maintaining product or service quality can be more challenging as the business grows AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • A recommendation whether growth is a suitable objective • Elements that the recommendation could depend upon, including such as losing control over the quality and consistency of the products, compromising on the natural / organic approach • A consideration of the implications for cost and ability to attract other firms • Weighing up of the factors and their relative influence on growth. • Depends upon the type of growth/how growth is achieved. • FF should evaluate their strategic goals, market conditions, and internal capabilities to determine if growth is a suitable objective. Note: Only accept judgements about growth but reward alternative objectives if growth discussed. Accept all valid responses.

Question 37

Clever Bean (CB) CB is a public limited company that operates a chain of coffee shops in several countries. The company was founded in 2010…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one feature of a public limited company. 1 AO1 Knowledge and understanding Indicative content Identification of a feature may include: • can sell shares • has shareholders • limited liability • separate legal identity from its owners • must publish its accounts and report to its shareholders 1(a)(ii) Explain the term dynamic business environment. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding (max 1 mark), including: • rapid / fast changing market • requires businesses to quickly adapt / be flexible. • changes may be internal or external AO2 Application Explanation of internal changes (max 1 mark), including: • leadership or management changes • organisational restructuring • investment in technology Application for internal changes (max 1 mark), including: • a new manager may bring a different vision or management style. • merging departments • upgrading equipment 1(a)(ii) Explanation of external changes (max 1 mark), including: • technological advancements • economic shifts • political and legal changes • social trends • environmental factors • new products /ideas/entrants • consumer tastes Application for external changes (max 1 mark), including: • AI, automation • inflation, recession • new regulations, trade policies • consumer preferences, demographics • climate change, sustainability pressures • examples of dynamic markets • examples of factors meaning markets are dynamic e.g. competition Accept all valid responses. 1(b)(i) Refer to Table 1.1. Calculate the change in profit from 2023 to 2024. 3 Indicative content. Profit = Revenue – Total costs (1) Profit in 2023 = $44m – ($6m + $16m) = $22m (1) OR Profit in 2024 = $50m – ($10m + $20m) = $20m (1) Change in profit = Profit in 2024 – Profit in 2023 = $20m – $22m = –$2m (OFR applies) Answer = –$2 (3), $ not required. Accept text explanation, such as decreases, instead of minus sign. In brackets indicates a minus figure No minus sign or other indication of decrease 2 marks OFR applies 1(b)(ii) Explain one use to CB of cost information. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding (max 1 mark), including: Uses may include: • helps determine the price/set prices • ensure it makes a profit/improve profitability • ensures the business covers its costs and earns a margin on each sale. • respond to rising costs • reduce unnecessary costs • help identify profitable/loss making products • set budgets AO2 Application Explanation (max 1 mark), including: • respond to rising costs by adjusting prices • identifying high-cost/profitable items allows the business to streamline operations or reduce waste. • accurate cost data helps the owner decide whether to introduce new products, offer discounts, or invest in equipment • can be used to help obtain external finance 1(b)(ii) Context (max 1 mark), including: • example of price-setting – e.g. CB calculates that the total cost of ingredients, labour, and overheads for one latte is $1.50. To make a profit, CB decides to sell the latte for $3.00. • if milk prices increase, the shop might adjust its pricing or switch suppliers. • operate in mass market • use of answer to 1(b)(i) (OFR)/reduction in profit (OFR)/profit change between 2023 and 2024 • use of information in Table 1.1 – direct costs increased by $4m (to $10m) and indirect costs increased by $4m (to $20m) • competitive market • considering market segmentation • demand for healthy food Accept all valid responses. 1(c) Analyse two benefits to CB of training its employees. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer the points to a business context. • Limited analysis that identifies question. • Application of one relevant connections between causes, • Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Annotate the first benefit in the left-hand margin and the second in the right-hand margin. 1(c) Responses may include: AO1 Knowledge and understanding (max 2 s) • improve the quality and consistency of its products and services • increase productivity • increase efficiency • motivate staff • develop new skills and knowledge AO2 Application Max one for application in the first benefit and max one for application in the second benefit. • working in a coffee shop is labour intensive work. • highly paid employees would like to improve skills • mission statement refers to a unique experience for customers • CB face very high costs that they need to control • train staff to be helpful, friendly and knowledgeable • offers food as well as coffee • located in high-income areas of major cities • competitive/dynamic business environment • operate in several countries AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Analysis may include: • training improves the skills of employees – greater efficiency/productivity more customers served/more sales/ profit. • empowerment – may improve motivation by allowing employees to feel more knowledgeable e.g., advising customers on different products • can increase customer satisfaction and loyalty – enhance its reputation/revenue/profits • improve staff morale and retention – reduce turnover/absenteeism/recruitment costs • increased efficiency – reducing costs and increasing profits • build its customer base – attracting customers from the competition Accept all valid responses 1(d) Evaluate whether CB should make greater use of market segmentation to be more successful. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed analysis Developed evaluation knowledge of application of that identifies • A developed judgement/conclusion is relevant key term(s) relevant point(s) to connections made. and/or factor(s) is the business between causes, • Developed evaluative comments used to answer the context. impacts and/or which balance some key arguments. question. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made with term(s) and/or to the business connections limited supporting comment/evidence. factor(s) is used to context. between causes, • An attempt is made to balance the answer the question. impacts and/or arguments. consequences. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 1(d) Responses may include: AO1 Knowledge and understanding (max 2 s) • market has smaller groups/sub-groups • used to better target marketing efforts • methods include geographic, demographic and psychographic Do not award K for product differentiation, must be market segmentation AO2 Application Limited application applies knowledge of market segmentation to CB once. Developed application + applies knowledge of market segmentation to CB twice. • customers are becoming more aware of the health effects of consuming too much caffeine or sugar in their drinks. • operates in prime areas • use fair trade coffee beans • customers environmentally conscious. • highly competitive/dynamic business environment • currently operates in the mass market. • target young professionals, students and tourists • research shows customers want healthy food options • use of answer from 1(b)(i)/decreasing profit • use of information from table 1.1 – e.g. rising costs/increasing revenue AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Arguments for greater use of market segmentation: • Better targeting of customer needs – tailor products and marketing more effectively. • Improved marketing efficiency – marketing campaigns can be more cost-effective and impactful when aimed at specific segments. • Become more competitive – attracting a wider customer base 1(d) Arguments against greater use of market segmentation: • increased complexity and costs – may require changes in product lines, marketing strategies, and store layouts, increasing operational complexity and costs. • further investment required – causing a strain on resources. • risk of alienating existing customers – might confuse or alienate loyal customers who value the current broad appeal. • maintaining a consistent brand image across – marketing becomes expensive and challenging • limited capacity to implement segmentation – may lack the data analytics capabilities or marketing expertise needed to effectively identify and serve distinct segments. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. While market segmentation offers opportunities for CB to better meet customer needs and stand out in a competitive market, it also introduces risks and costs. A balanced approach may be most suitable – CB could begin with light segmentation (e.g. offering healthier food options) while maintaining its mass market appeal. This would allow CB to test the effectiveness of segmentation without overcommitting resources. Other evaluative arguments may include: • target market – how to identify and attract a different market segment and costs involved • selling at a lower price might damage the brand reputation. • choice depends on operating costs, and customer preferences • CB would need to conduct market research to determine which method would be more effective in increasing demand for its products • a recommendation which could be that related to one method or could be that a combination is better. this helps CB to appeal to customers with different needs. • yes, it should/should not with justification Evaluation must be clearly related to market segmentation Accept all valid responses.

Question 38

The Research Agency (TRA) TRA is a quaternary sector business. It is the market leader in providing social media data to food manufacturers…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one stage of the transformational process. 1 Responses include: The stages of the transformational process: • Inputs • Adding value / production / manufacturing / operations / process • Outputs Do not accept examples of inputs and outputs 1(a)(ii) Explain the term multinational business. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Knowledge of a multinational businesses (max 1 mark). Must be knowledge that shows clear distinction between a national and international business including: • Capital in more than one country • Operates in more than one country 1(a)(ii) AO2 Application Limited application applies knowledge of a multinational business to a business context. Developed application + applies knowledge of a multinational business to a business context. • Any exemplification of a multinational business (not just naming a MNC) • A business might have production factories in country F and another country • Can take advantage of lower cost production in low-income countries • Benefits of lower transport costs and better market information about consumer tastes etc • Can bring the business closer to their main markets • Can take advantage of relatively weak government restrictions. • May avoid import restrictions by producing in the local country. • Gain access to natural resources which might not be available in their base country. • Communication links with headquarters may be poor. • Language, legal and culture differences could make communications difficult. • Coordination with other plants in the multinational group will become more difficult. • Skill levels of the local employees may be low, requiring substantial investment in training programmes. Do not expect, but reward • Can take advantage of comparative/absolute advantage in countries • To gain economies of scale Accept all valid responses. 1(a)(ii) Exemplar and annotations Mark Rationale A business with capital in more than one country . For 3 Clear distinction between MN and example, a business that has factories in two countries to take international/national business. advantage of lower production costs abroad . Example of factories in two countries and a benefit. Headquarters in one country, but with operating branches in 3 Knowledge of an MNC and a another . This can allow the business to operate within other reason and a benefit. markets to reduce transportation costs . Own shops in two or more countries so that it can take 2 Distinction shown by shops in more advantage of lower transportation costs . than one country (capital) and understanding of a feature of MN. Operating in different countries by selling goods abroad. 1 A definition, but ‘selling abroad’ is an international business, not a multi-national. A business that sells in other countries. 0 No credit – this is an international business. 1(b)(i) Refer to Fig 1.1 and other information. Calculate the combined total number of potential consumers who would prefer lemon or strawberry flavoured water. Formula: Number of potential customers = number who prefer lemon + number who prefer strawberry (1 – formula may be inferred by correct use of numbers) OR Calculation: 34% of 8000 = 2720 (1) 34% + 28% = 62(%) (1) 28% of 8000 = 2240 (1) 62% of 8000 (1) 2720 + 2240 = 4960 (1 – OFR applies) = 4960 (1) Ans = 4960 (3 marks) 1(b)(i) Examples and annotations Marks Awarded Explanation Annotations 3 marks Correct answer Working and $ do not matter. 4960 Allow one to denote the three marks next to correct answer. 2 marks Two of the following: To award two marks, there must be • Correct formula • Two and a • Correct calculation of number OR who prefer lemon (2720) • One , one and • Correct calculation of number one who prefer strawberry (2240) OR An incorrect answer with one mistake allowing OFR for final stage. 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correct calculation of number who prefer lemon (2720) • Correct calculation of number who prefer strawberry (2240) 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one reason why TRA uses sampling. AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Identification of a reason why a business uses sampling (max 1 mark), including: • Cheaper/low cost • Quicker/less time • More representative AO2 Application Explanation of a reason why a business uses sampling (max 1 mark), including: • Explanation of how this affects market research • More practical, for example than asking the entire population • Opportunity cost 1(b)(ii) Context applied to TRA (max 1 mark), including: • Quaternary sector business • Market is to provide social media data (vast amounts of data) • To food manufacturers in country F (large industry) • TRA is the market leader in country F to provide this data • Market has grown by over 40% over the last year • Sample size is 8000 potential consumers • 65 researchers • All work from home • Use of Fig 1.1 Accept all valid responses. Exemplar and annotations Mark Rationale Cheaper which keeps the cost of market research low by 3 A reason identified, explained and only asking 8000 potential consumers . in context, so all 3 marks. Faster to find out Lemon is the most preferred flavour . 2 A reason identified, but not explained. The context about TRA/DF is fine. Makes it cheap for TRA. 1 Identification of a reason, but no explanation or context. Names are not enough for context. It allows TRA to find out information about the market. This 0 This is a reason to use market means that it can let DF know that Lemon is the most preferred research – not sampling. flavour and DF is likely to be able to sell more products. 1(c) Refer to Fig 1.1 and other information. Analyse two reasons why the data collected for DF may not be reliable. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer the points to a business • Limited analysis that question. context. identifies connections • Knowledge of one relevant • Application of one relevant between causes, impacts point is used to answer the point to a business context. and/or consequences of question. two points. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Annotate the first reason in the left-hand margin and the second reason in the right-hand margin 1(c) Responses may include: AO1 Knowledge and understanding – reasons why data collected may not be reliable, including: Identification of a reason why market research data may not be reliable , including: • Bias • Sample size • Sample not representative of the market • Wrong/poor questions • Wrong media used • Human error • Poorly defined objectives • Time lag between research and implementation This is not secondary market research, so do not credit answers about why secondary market research may not be reliable. However, answers which suggest the data may have changed (time lag) are acceptable. AO2 Application Application of the reason to DF , including: • TRA is the market leader in providing social media data to food manufacturers in country F • Market has grown by over 40% over the last year • DF specialises in non-alcoholic drinks • DF is a multinational business • TRA sampled 8000 potential customers • Sampled on social media • Asked about favourite fruity flavours • Use of data in Fig 1.1 • TRA employs 65 researchers • All of TRA’s researchers work from home • TRA’s workers have poor motivation • TRA has high labour turnover • Suggestion that some TRA employees are not working very hard. 1(c) AO3 Analysis Limited analysis of a reason why market research data may not be reliable – developed analysis , including: • Bias; may mean that potential customers are persuaded to give a wrong answer leading to launching the wrong product – low sales. • Sample size; not enough people asked which may mean it launches the product with few sales – leading to a loss. • Sample representation; not enough different views sought leading to the wrong product being launched – no profit. • Wrong/poor questions; potential customers may not know what is being asked, leading to the product not being purchased – makes a loss. • Wrong media used; if the customers do not tend to use that medium then the results will not transform into sales – leading to it not making a profit. • Human error; if the results are inaccurate this could lead to the wrong products being launched – ruining the brand image of the business. • Poorly defined objectives; if the reason for the research is unclear this can lead to the questions not representing what the business needs to know – leading to launch of the wrong product and weak sales. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis The wrong questions were Of the 8000 potential Which could lead to DF launching asked , customers , the wrong flavour leading to lower sales . Sampling bias . By only asking young people about So the flavours only appeal to the their favourite fruity flavour , young, which may lead to lower sales of the drink and therefore decrease DF’s profit . 1(d) Evaluate the most effective way for TRA to improve the motivation of the home working employees. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of that identifies • A developed and/or factor(s) is used relevant point(s) to connections judgement/conclusion is to answer the question. the business between causes, made. context. impacts and/or • Developed evaluative consequences. comments which balance some key arguments. o 1(d) Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) that identifies • A judgement/conclusion and/or factor(s) is used to the business connections is made with limited to answer the question. context. between causes, supporting impacts and/or comment/evidence. consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable No creditable No creditable response. response. response. 1(d) Responses may include: AO1 Knowledge and understanding Knowledge of ways to improve motivation (max 2 marks), including: • Payment (financial) methods: time based, salary, piece rates, commission, bonuses, profit sharing, performance- related pay, fringe benefits • Non-financial motivators: training, opportunities for promotion, development, status, job re-design, team working, empowerment, participation, job enrichment • Use of the main motivation content theories (Taylor, Mayo, Maslow, Herzberg and McClelland) and motivation process theory (Vroom). AO2 Application Application to TRA , including: • TRA is the market leader in providing social media data to food manufacturers in country F • Market has grown by over 40% over the last year • Samples using social media • TRA employs 65 researchers • High speed internet connection • TRA’s workers have poor motivation • TRA has high labour turnover • Suggestion that some TRA employees are not working very hard. • Data from Fig 1.2 – I hate being so isolated – I never get to speak to any other employees. – I have to use my own electricity, and the cost has doubled in the last two years. – I know some employees are not working very hard, but they get paid the same as me. It’s not fair! 1(d) AO3 Analysis Limited analysis of ways to improve motivation – developed analysis , including: • Payment methods: may increase costs – however may make employees work harder for higher pay, leading to improved productivity. • Non-financial methods; may be less cost or free – leading to higher productivity without impacting the costs of the business. • Content theories: likely to improve working conditions for the employees leading to increased productivity – however may have a significant cost increase leading to lower profit. • Process theory: increased productivity for workers who expect increased rewards – however if the employees do not believe the promises, then this may increase costs for no benefit. AO4 Evaluation Limited evaluation of the most effective way to improve motivation – developed – developed in context , including: • Relative importance of motivation to TRA – how important is the productivity of employees – likely to be highly important due to the quaternary nature of the business. • Choice of method depends on; cost of method, likely increases in productivity, finance available, future forecasts in market changes, how skilled the researchers job actually is and what training is involved. • The impact of the chosen motivation method(s) and the impact of poor motivation / high labour turnover. • The extent to which this is a matter of working from home and is inherent in the whole country, as opposed to just TRA employees. • A judgement that other issues may be more important than motivation of the employees. A valid judgement must identify one way to motivate the employees (a ‘depends upon’ may include more than one because it is not a judgement as such). If the candidate gives more than one judgement, only reward the best judgement and put SEEN next to the other(s). Accept all valid responses. 1(d) Exemplars for awarding evaluation Evaluate the most effective way for TRA to improve the motivation of the home working employees. L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) Money is the most effective way. Money is the most effective way, Money is the most effective way, because it will allow all of TRA’s because it will allow all of TRA’s employees to fix the issues which employees to fix the issues which they are complaining about. they are complaining about, such as their rising electricity bills. TRA should use teamworking as it TRA should use teamworking as it TRA should use teamworking as it is the best solution. is the best solution because it will is the best solution because it will motivate the employees, without motivate the isolated employees, adding significantly to the costs of without adding significantly to the the business. costs of the business. The most effective way depends on The most effective way depends on The most effective way depends on the type of employees at TRA. the type of employees at TRA. If the type of employees at TRA. If the employees are Theory X, then the employees are more concerned money is more likely to be the best about their electricity bills, then way. However, if they are Theory money is more likely to be the best Y, then teamworking may be better. way. However, if they are more concerned about being isolated, then teamworking may be better.

Question	Answer	Marks	From
1	see sheet	30	9609/22 Feb/March 2017
2	see sheet	30	9609/21 May/June 2017
3	see sheet	30	9609/22 May/June 2017
4	see sheet	30	9609/23 May/June 2017
5	see sheet	30	9609/21 Oct/Nov 2017
6	see sheet	30	9609/22 Oct/Nov 2017
7	see sheet	30	9609/22 Feb/March 2018
8	see sheet	30	9609/22 Feb/March 2018
9	see sheet	30	9609/21 May/June 2018
10	see sheet	30	9609/22 May/June 2018
11	see sheet	30	9609/21 Oct/Nov 2018
12	see sheet	19	9609/21 Oct/Nov 2018
13	see sheet	30	9609/23 Oct/Nov 2018
14	see sheet	30	9609/22 May/June 2019
15	see sheet	30	9609/23 May/June 2019
16	see sheet	30	9609/23 May/June 2020
17	see sheet	30	9609/23 Oct/Nov 2020
18	see sheet	30	9609/23 Oct/Nov 2020
19	see sheet	30	9609/22 Feb/March 2021
20	see sheet	30	9609/22 May/June 2021
21	see sheet	30	9609/24 May/June 2021
22	see sheet	30	9609/22 Oct/Nov 2021
23	see sheet	30	9609/23 Oct/Nov 2021
24	see sheet	30	9609/22 May/June 2022
25	see sheet	30	9609/22 May/June 2022
26	see sheet	30	9609/22 Oct/Nov 2022
27	see sheet	30	9609/22 Feb/March 2023
28	see sheet	30	9609/21 May/June 2023
29	see sheet	30	9609/23 May/June 2023
30	see sheet	30	9609/22 May/June 2024
31	see sheet	30	9609/21 Oct/Nov 2024
32	see sheet	30	9609/22 Oct/Nov 2024
33	see sheet	30	9609/23 Oct/Nov 2024
34	see sheet	30	9609/21 May/June 2025
35	see sheet	30	9609/23 May/June 2025
36	see sheet	30	9609/23 May/June 2025
37	see sheet	30	9609/21 Oct/Nov 2025
38	see sheet	30	9609/22 Oct/Nov 2025

Questions41 pages

Mark scheme38 answers

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Questions as text

Q1 · Gourmet Ices (GI) GI is a partnership owned by Tom and Amy Smith 9609/22 Feb/March 2017

Q2 · Magical Mirrors (MM) MM manufactures a range of mirrors using flow production 9609/21 May/June 2017

Q3 · Quality Leather (QL) QL is a worker co-operative 9609/22 May/June 2017

Q4 · Designer Clothing (DC) DC is a medium sized private limited company 9609/23 May/June 2017

Q5 · Car Wash (CW) CW is a national chain of car wash businesses 9609/21 Oct/Nov 2017

Q6 · Nearly New (NN) NN sells second-hand computers 9609/22 Oct/Nov 2017

Q7 · Paul’s Clothes (PC) PC is a sole trader business that is owned and managed by Paul 9609/22 Feb/March 2018

Q8 · Luxury Carpets (LC) LC is a large public limited company operating in country B 9609/22 Feb/March 2018

Q9 · Veg Cans (VC) VC is a public limited company which produces canned vegetables 9609/21 May/June 2018

Q10 · Online Travel (OT) OT is a private limited company in country X that sells international… 9609/22 May/June 2018

Q11 · Swimming Pools (SP) SP is a public sector organisation 9609/21 Oct/Nov 2018

Q12 · Katie’s Cakes (KC) KC is a partnership, owned by Katie and her son James 9609/21 Oct/Nov 2018

Q13 · Ontime Taxis (OT) OT is a taxi business 9609/23 Oct/Nov 2018

Q14 · Job Shop (JS) JS is a public sector organisation in country X 9609/22 May/June 2019

Q15 · First Nature (FN) FN is a co-operative farm producing milk, beef and vegetables 9609/23 May/June 2019

Q16 · Super Heroes (SH) SH is a leisure (theme) park aimed at 10–18 year olds 9609/23 May/June 2020

Q17 · Aashna’s Pies (AP) AP produces and sells high quality pies 9609/23 Oct/Nov 2020

Q18 · Braid Runner (BR) Lewis is a hairdresser 9609/23 Oct/Nov 2020

Q19 · Free Burgers (FB) FB is a private limited company that produces premium meat‑free burgers 9609/22 Feb/March 2021

Q20 · Hot Bubblez (HB) Karen is a sole trader who operates a service business called Hot… 9609/22 May/June 2021

Q21 · Apple Farm (AF) AF is owned by Desi 9609/24 May/June 2021

Q22 · Auto Bike (AB) AB is a private limited company that repairs and maintains motorbikes 9609/22 Oct/Nov 2021

Q23 · Van Man (VM) Obi is a sole trader who operates a van service 9609/23 Oct/Nov 2021

Q24 · Farm Produce (FP) FP is a primary sector co-operative made up of six farms in country G 9609/22 May/June 2022

Q25 · Seaside Hotel (SH) SH is a large hotel located in a tourist area of country H 9609/22 May/June 2022

Q26 · Friendly Fit (FF) FF is a public limited company that owns a popular social media and… 9609/22 Oct/Nov 2022

Q27 · Wedding Gifts (WG) WG is owned by Tomas who is a sole trader 9609/22 Feb/March 2023

Q28 · Great Resources (GR) GR is a business partnership that creates educational resources 9609/21 May/June 2023

Q29 · Great Desks (GD) GD is a co-operative owned by all of its employees 9609/23 May/June 2023

Q30 · Post Scent (PS) PS is a private limited company operating in country H 9609/22 May/June 2024

Q31 · Coffee Company Local (CCL) CCL is a family business in country Y 9609/21 Oct/Nov 2024

Q32 · The Drink Company (TDC) TDC is a multinational carbonated drinks manufacturer with… 9609/22 Oct/Nov 2024

Q33 · Vegan Burger (VB) VB is an established vegan burger chain in country X 9609/23 Oct/Nov 2024

Q34 · Natural Shampoos (NS) NS is a private limited company set up by Saira and Chantal as a… 9609/21 May/June 2025

Q35 · Crafty Toys (CT) CT is a co-operative that produces and sells a range of wooden toys… 9609/23 May/June 2025

Q36 · Fresh Farm (FF) FF is a partnership in country Q that grows a range of fruits and… 9609/23 May/June 2025

Q37 · Clever Bean (CB) CB is a public limited company that operates a chain of coffee shops in… 9609/21 Oct/Nov 2025

Q38 · The Research Agency (TRA) TRA is a quaternary sector business 9609/22 Oct/Nov 2025