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

Question 1

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

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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 2

Perfect Pizza (PP) Paul is a chef. He is looking to set up a new pizza restaurant in his local town in country A. He has done some research…

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Question Answer Marks 1(a)(i) Define the term ‘long term sources of finance’ (lines 18–19). 2 Knowledge and Application Mark A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition should cover the following: • Understanding of ‘source(s) of finance’ – any reference to where money/capital/cash etc. comes from i.e. reference to a source of finance, such as a mortgage or equity (i.e. shares, debentures) • Understanding of ‘long term’ – this can be reference to any time period more than a year Exemplar Mark Rationale When a business gets money from a Both elements 2 bank for more than a year covered Finance for more than a year, e.g. Both elements 2 Mortgage covered Understanding of Money that the business gets from a source of finance but bank that does not need to be paid 1 too vague about long back quickly term An understanding of A way to get new cash into the source of finance but business that does not have to be 1 ‘long time’ is too paid back for a long time vague and partly tautological. A long term source of finance is a Tautological, showing source of finance that does not have 0 no understanding. to be paid back for a long time. 1(a)(ii) Briefly explain the term ‘diversity and equality’ (line 14). 3 Award one mark for each point of explanation: Example or some other way of showing good understanding, i.e. A development of an example used C 1 mark in B, link to motivation, link to culture, legal requirements etc. Understanding of diversity – different groups of B 1 mark employees, or an example of different groups Understanding of equality – no discrimination in the A workplace – do not just reward ‘are equal’ there must 1 mark be some understanding of treating people equally No discrimination in the workplace, for example, against different groups of employees. Can be used to develop a reputation as a good employer. Helps attracts and keep employees. Exemplar Mark Rationale Getting rid of discrimination between different groups of worker, and 3 All three elements treating them equally which is a legal requirement Treating all workers the same way no matter what differences they might have, such as men and women 3 All three elements should be paid equally if they do the same job Giving employees equal rights for different people, such as different 2 A and B mark races Equal rights for different races 1 B mark only Everybody has the same treatment 1 A mark only 1(b)(i) Refer to Figure 1. The total value of market sales in country A was 3 $50m. Calculate the total value of sales for the three largest businesses. Mark Rationale Correct calculation the total value of sales for the three largest businesses (with or without working or $ or m) 3 OR Correct calculation of all three companies value of sales ($14m, $11m and $10m) (with or without working or $ or m) Correct calculation of two of the top three companies value of 2 sales (with or without working or $ or m) Correct formula or correct calculation of % share of top three companies (70%- with or without working or %) 1 OR Correct calculation one of the top three companies value of sales (with or without working or $ or m) 0 No creditable content Total value of market sales x Percentage share of market Top 3 = 28% + 22% + 20% = 70% $50m × 70% (70/100) = $35m Common incorrect answers Answer Mark Rationale Allow an answer of 35 with or without 35 3 $ or m (no working required) 28% = $14m 2 Two correct 22% = $11m Allow this for 1 mark, even without 70 1 working. Any variation of 70 worth 1 mark 28% = $14m 22% = $11m 3 All correct but no total 20% = $10m 1(b)(ii) Explain two appropriate methods (other than market share) that could 3 be used to measure the size of PP. Level Knowledge and Application Mark 2b Knowledge and understanding of TWO methods 3 (APP+APP) to measure the size of PP Knowledge and understanding of ONE method 2a (APP) 2 to measure the size of PP Knowledge and understanding of method(s) to 1 (K) 1 measure the size of a business No creditable content 0 K marks can only be awarded ONE mark in total, no matter how many instances Context and content is likely to come from: • Number of employees, national chain with 10% of the national market is likely to have a large number of employees therefore a large business • Revenue, e.g. chain 1 has 15% of $50 m which is $5 m, this would be a large business • Capital employed Method of measurement (K) Possible context (APP) National chain with 10% of the national Number of employees market is likely to have a large number of employees therefore a large business Use of figures from Fig 1 to show Revenue/Sales turnover comparative size Reference to the likely capital/assets that Capital/assets employed a pizza business might have e.g. tables, kitchens etc. Pizza-shops/restaurants – must be Number of outlets specific to PP, not generic Number of people who eat in the pizza- Number of customers restaurants Sales volume Number of pizzas/meals sold 1(c) Analyse two factors Paul should consider when selecting a restaurant 8 manager. Level Knowledge and application Analysis Shows understanding of Good analysis of TWO TWO factors of selection 4 factors of selection in 4 in context context 2 Shows understanding of Good analysis of ONE ONE factor of selection 3 factor of selection in 3 in context context Shows understanding of Limited analysis of TWO 2 2 TWO factors of selection factors of selection 1 Shows understanding of Limited analysis of ONE 1 1 ONE factor of selection factor of selection 0 No creditable content Highlight the factors as you mark One factor analysed in context, max 3+3 Contextual analysis likely to come from: • Need to have customer service experience; marketing skills, communication etc. • Will be in charge of other employees; management skills • Will require skills in inventory management • New business so may need to be willing to work on lower salary Examples of Examples of Examples of possible factors of application/context analysis selection Any relevant restaurant management Better qualified manager qualifications, customer → improved customer Qualifications service qualifications, service → more sales → inventory management more profit etc« Diversity and equality Lives near restaurant → Local town in country A – more likely to be on time Location will need to live here or to work → better staff can relocate. management Good inventory Customer service, management → less Skills supervising employees, wastage in the restaurant inventory management. → lower costs → increased profit In other (pizza) restaurants, one of the Worked in another PP competitors, other PP restaurant → knows the restaurants. Experience procedures → less training Experience in customer needed → lower costs → service, supervising increased profit employees, inventory management. Cost 1(d) Evaluate whether Paul should enter into a franchise agreement with 11 PP. Knowledge and Analysis and Evaluation Mark Mark 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 (two sided) based on the impact(s) of Paul entering into a 4 franchise agreement with Shows understanding of PP PP entering into a 3–4 Argument (one sided) franchise agreement based on the impact(s) of Paul entering into a 3 franchise agreement with PP Limited analysis of TWO impacts of entering into a 2 franchise agreement Shows knowledge of 1–2 franchises Limited analysis of ONE impact of entering into a 1 franchise agreement No creditable content Impacts can be positive or negative – a balanced argument will cover both positive and negative impacts. Annotate analysis and arguments FOR in the left hand margin and AGAINST in the right hand margin Context/content: Advantages • less risk to Paul as he benefits from the expertise and reputation of PP brand • Assistance from PP so Paul makes less mistakes in his business- decisions such as the policies for diversity and equality; • Access to local marketing and the PP website will help generate sales; Disadvantages • Up-front costs to purchase the franchise ($40 000); • The royalty fee of 5% may be a drain on his cash flow • Clash of ideas as Paul will have to follow the criteria set out in his franchise agreement – this may limit his freedom to make decisions. Evaluation is likely to come from a candidate: 1. Judging whether the advantages outweigh the disadvantages 2. Weighting their response, for example, “this is the main advantage because” is likely to lead an evaluative response. An example of how an answer could develop and how it should be annotated. ANAN K APP AN EVAL (one sided) Which increases Overall Paul the costs of should enter into starting up a a franchise An independent Which increases restaurant to agreement restaurant would the costs of Paul and may because the cost $25 000 staring up a make it harder to extra sales are whereas a PP restaurant to break even or likely to cover the franchise is Paul. (AN) survive in his first extra costs. $40 000. (APP) year of trading. (EVAL – (ANAN – one statement) sided) However he should do some market research It is expensive to to see just how set up a much more the franchise. (K) However the sales would be in reputation of PP a PP franchise. National above may gain more (EVAL – the line Which is likely to sales in the first developed) promotion will be increase sales in year making it provided within the first year. more likely that If the extra sales the setup cost. (AN) he would break did not cover the (APP) even and extra costs then survive. (ANAN – he would two sided) probably be better opening the independent restaurant. (EVAL – justified)

Question 3

Perfik Plumbing (PP) PP is a plumbing business owned and managed by Navpreet. She set up PP as a sole trader three years ago when she quali…

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2(a)(i) Define the term ‘unique selling point (USP)’ (line 6). 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 • A unique selling point is something that makes a product stand out from the 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. 2(a)(ii) Briefly explain the term ‘internal growth’ (line 18). 3 Award one mark for each point of explanation: C Example or some other way of showing good understanding, 1 mark e.g. also known as organic growth B An idea of ‘growth’ – i.e. the increase in size of a business 1 mark A An idea of ‘internal’ – i.e. through the reinvestment of profits. 1 mark Increasing sales/stores/outlets Exemplar: Internal growth is when a business get larger through the use of retained profit. This is usually a slower way to grown compared to external growth. 2(b)(i) Refer to Table 2. Calculate the price elasticity of demand if Navpreet 3 changes her price from $24 to $30 per hour. Rationale Marks Correct calculation of the PED (no minus sign required) with or 3 marks without correct working Correct formula (may be implied through the use of figures) and 2 marks correct calculation of % change in price and correct calculation of % change in QD Correct formula or correct calculation of % change in price or 1 mark correct calculation of % change in QD No creditable content 0 marks Formula: % change in QD % change in P % change in QD = (–)20% % change in P = 25% PED = (–)0.8 Note: an inverted formula is one error repeated as long as there is working to support the answer 2(b)(ii) Explain one way in which PP could make use of price elasticity of 3 demand calculations. Level Knowledge and Application Marks 2 Explanation of one way PED calculations could be 3 (APPAPP) useful in context 2 (APP) Identification of one way PED calculations could be 2 useful in context 1 (K) Identification of one way PED calculations could be 1 useful 0 No creditable content 0 Answers could include: • Navpreet see that plumbing services are price inelastic. • Navpreet should increase her price – she may make more profit if she increases her prices. • Price is obviously not the most important factor when customers purchase plumbing services. • The inelastic response may be due to Navpreet’s USP. • $24 to $30 brings in same amount of revenue (but will probably increase profit. $30 to $36 increases revenue (and presumably profit). 2(c) Analyse one advantage and one disadvantage to Navpreet of taking out a 8 mortgage on her own home to finance PP’s expansion. Knowledge and Level Marks Analysis (4 marks) Marks Application (4 marks) Good analysis of one advantage AND one disadvantage to 4 Navpreet of taking out a mortgage to finance Shows understanding expansion in context of taking out a 2 3–4 mortgage to finance Good analysis of one expansion in context advantage OR one disadvantage to 3 Navpreet of taking out a mortgage to finance expansion in context Limited analysis of one Shows knowledge of advantage AND one mortgages and 2 disadvantage of a 2 expansion mortgage as a source of finance 1 Limited analysis of one Shows knowledge of advantage OR one sources of finance or 1 disadvantage of a 1 expansion mortgage as a source of finance Limited analysis in context: Marks limited to 4+2=6 Annotate advantages on the left and disadvantages on the right Analysis should be about the use of a mortgage NOT expansion Answers could include: Advantages • Would allow Navpreet to retain control of PP and raise sufficient finance for the lease • Long term source of finance so would allow Navpreet to repay the majority when the new shop is making a profit • Relatively (compared to loans) low rate of interest, would reduce repayment costs. Disadvantages • Navpreet may lose her house if she is unable to pay back the mortgage with earnings from the new shop • The bank may not allow Navpreet to take out a mortgage for the amount required • Navpreet must pay interest on the mortgage and she does not know if the new shop will be successful. 2(d) Evaluate promotional methods that PP could use to grow in the future. 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 arguments in 5 context Shows understanding of Argument based on TWO TWO promotional 4 promotional methods in 4 methods in context context Shows understanding of Argument based on ONE ONE promotional method 3 promotional method in 3 in context context Shows knowledge of Limited analysis of TWO TWO promotional 2 2 promotional methods methods Shows knowledge of Limited analysis of ONE 1 1 ONE promotional method promotional method No creditable content Allow above and below the line as methods Answers could include: Above the line methods • Advertising – Plumbing is likely to remain a local business so national advertising is likely to cost too much and be inappropriate. Local TV, radio, newspapers and magazines may be appropriate and could be targeted to the appropriate market segments. Below the line methods • Word of mouth – Navpreet has been using this, but unpredictable and unlikely to help further growth • Sponsorship – Navpreet could sponsor a local team/programme etc.. May allow PP to become a more well-known brand • Direct mailing/Leaflets – relatively cheap and puts the contact details for Navpreet into potential customers homes for when needed. • Price promotions – would need to be communicated (perhaps through new shop if it goes ahead). • New shop could be a form of promotion – high street signage, repeat customers etc« • Promotional pricing – sales, discounts etc. 2(d) Branding • Navpreet has a USP and could build on this (perhaps with new shop) to make PP a household brand. Nature of the service is that it is not a day to day product, so a brand needs to be known for when it is needed. Packaging • Only appropriate for products sold through the shop. Could cross advertise using packaging.

Question 4

Clothing Line (CL) Thamir is an entrepreneur who built up an international retail business. He is now a multi-millionaire who provides vent…

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Question Answer Marks 1(a)(i) Define the term ‘venture capital’. 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content One mark for an understanding that this is a source of finance (from the business perspective) or an investment (from the entrepreneurs perspective) • Source of finance/investment/equity/funds One mark for an understanding that this is risky, or for a risky purpose – do not allow ‘risk’ on its own as all investments have risk • Provided for high risk/risky/riskier/new businesses/high growth/innovations Exemplar Marks Rationale A source of finance provided to 2 Both elements high risk businesses. Investment into a new 2 Both elements business The equity into a high growth 2 Both elements business A risky source of finance 2 ‘Risky’ is just enough for high risk – don’t accept risk on its own An investment with some risk 1 Investment is worth a mark, but ‘some risk’ is true of all investments High risk capital 1 ‘Capital’ is a repeat of the question The money provided to a 1 ‘starts up’ is good enough business when it starts up (new business), but ‘money provided’ is not enough (source of finance) The capital provided for a 0 A tautology venture 1(a)(ii) Briefly explain the term ‘internal growth’. 3 Award one mark for each point of explanation: Knowledge Marks C Example (an example needs to be specific – not the 1 same as items in the A mark) or some other way of showing good understanding, for example AKA organic growth or less risky than external growth, higher cost, higher profitability etc. B Explanation of internal (in terms of growth), – using own 1 funds, reinvesting etc. or in terms of NOT merging/taking over another business (do not allow not external) A Explanation of growth – expansion, getting bigger, opening 1 more stores/factories/outlets etc. Content When a business expands its own operations using internal sources of finance. Known as organic growth. Exemplar Marks Rationale Organic growth by using the 3 ‘Organic growth’ – C mark businesses profits to open ‘using businesses own profits’ more shops. – B mark ‘to open more shops’ – A mark Expansion by reinvesting 2 Expansion is A mark profits as opposed to a Reinvesting is B mark merger. ‘As opposed to merger’ is also the B mark Growth by using the 2 B and C mark – do not award businesses own funds. It is ‘growth’ as the A mark also known as organic growth. because it is part of the term/in the question. Expansion by opening more 1 This is only about growth – A stores or selling more mark, but many times which products. This growth will lead only gives one mark to more sales and the business being able to grow even more in the future. Growth by using internal funds 0 Tautology 1(b)(i) Refer to Table 1. Calculate the current ratio as at 31 December 2017. 2 Rationale Marks Correct answer with or without correct working 2 Formulae or identification of correct figures 1 No creditable content 0 Content CA CL 200 40 = 5:1 (accept 5) Answer Rationale Marks 5 (no working) A correct answer 2 CL/CA Formula is wrong way round but 1 = 40/200 correct figures have been identified = 1:5 1:5 (no working) No formula or correct identification of 0 correct figures. 40/200 = 0.2 Correct figures have been identified 1 0.2 (no working) No formula or correct identification of 0 correct figures. 1(b)(ii) Analyse two limitations to Thamir of using published accounts to 8 decide whether to invest in CL. Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2 Shows 4 Developed analysis 4 understanding of to Thamir of two two limitations of limitations of using CL’s published CL’s published accounts accounts Shows 3 Developed analysis 3 understanding of to Thamir of one one limitation of limitation of using CL’s published CL’s published accounts accounts 1 Shows knowledge of 2 Limited analysis of 2 two limitations of two limitations of published accounts using published accounts Shows knowledge of 1 Limited analysis of 1 one limitation of one limitation of published accounts using published accounts 0 No creditable content OFR Do not accept answers which state that the published accounts could be ‘wrong’ without a valid reason why they might be wrong. Analysis must be about the limitations to Thamir (as a potential owner/investor) to achieve level 2. Non-contextual answers can only gain 2 + 2 = 4 marks 1(b)(ii) Content • Historical – Published accounts are backward looking and will not tell Thamir much about the current state of the business for his investment. Is the business worth the same now as it was when the accounts were published. Also these accounts are from 31/12/17 – so half a year out of date. • Need something to compare the accounts with – this is only one year, so there is nothing to compare with for Thamir to know if CL is improving or not. • Need other businesses within industry to compare – no other businesses in the clothing industry to compare CL’s accounts with. • Non-financial assets are not included, e.g. human resources, management. May not give the full picture to Thamir. Only includes quantitative values • Income statement only shows totals for the year • Statement of financial position only a snapshot of a business at one point in time • Market is dynamic and changes will not be reflected in the historical account Accept reference to what is missing from the given accounts (fig 1) as contextual (even though the data might appear in the published accounts), e.g. no inventory shown Examples of Examples of Examples of Examples of knowledge of application/context possible developed a limitation of limited analysis in using analysis context published accounts Can be window CL may have This could Which may dressed (K) postponed payment make the lead Thamir to of bills until after current assets pay more for 31st December appear to be 50% of the (APP) worth more business (DEV) (AN) May not reflect Which may make a risky and may lead changes (K) Thamir’s 50% investment to him losing investment in (AN) his money shares (APP) (DEV) May not show The $760 000 value The business Which may customer of the non-current may be worth lead Thamir to loyalty (K) assets may not more than not invest in the include the Thamir thinks it business. customer loyalty is (AN) (DEV) (APP) 1(c) Explain two qualities that Thamir is likely to need as a successful 4 entrepreneur. Level Knowledge and Application Marks Annotations 2 Explanation of two characteristics in 4 APP + APP context Explanation of one characteristic in 3 APP context 1 Explanation of two characteristics 2 K + K Explanation of one characteristic 1 K 0 No creditable content 0 Content • Risk taker • Leadership skills • Energy and enthusiasm • Self-belief and confidence • Persistence and drive • Ability to work under pressure • Creativity and imagination • Multi-skilled • Dynamic ARA Knowledge of entrepreneurial Possible context (APP) quality needed for success (K) Risk taker To invest venture capital Leadership skills To become a 50% owner/manager in CL Energy and enthusiasm To take on managerial roles such as advice on JIT Drive Because he was driven to build up an international retail business 1(d) Discuss which stakeholders of CL are likely to be most affected by the 11 introduction of Just in Time (JIT) inventory management. Knowledge and Analysis and Application Evaluation (4 marks) Marks (7 marks) Marks Annotation Annotation A justified 7 EVAL judgement based + on a developed EVAL argument of at + least two EVAL stakeholders A developed 6 EVAL judgement based + on a developed EVAL argument of at least two stakeholders A basic 5 EVAL judgement based on a developed argument of at least two stakeholders Shows 3–4 APP + Argument based 4 DEV + understanding of APP on the impact on DEV two stakeholders two stakeholders in context of CL of just in time in context Shows APP Argument based 3 DEV understanding of on the impact on one stakeholder one stakeholder in context of CL of just in time in context 1(d) Knowledge and Analysis and Application Evaluation (4 marks) Marks (7 marks) Marks Annotation Annotation Shows knowledge 1–2 K + K Limited analysis 2 AN + of two on two AN stakeholders stakeholders of CL of the introduction of just in time Shows knowledge K Limited analysis 1 AN of one on one of CL stakeholder stakeholder of the introduction of just in time No creditable content 0 Content • Suppliers – at the moment the suppliers deliver once a month but just in time will require more regular deliveries (perhaps daily). This is likely to increase the costs of the supplier which they may or may not pass on to CL. Will CL need to change to closer suppliers? Current owners – could require significant investment. May also be savings to be made on the large warehouse that may not be needed any more. • Employees – May be made redundant if they work in the warehouse – alternatively their job may change to distribution rather than warehouse. • Customers – used to next day delivery, but this may not be possible if clothes have to be ordered from suppliers after they have been ordered by the customer. • Thamir – Condition of him investing in CL 1(d) ARA An example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Suppliers only deliver JIT might Which could Overall the inventory to mean that decrease the supplier will CL once a the suppliers suppliers be more month and would need profit. affected by will need to to deliver the increase goods every introduction this. day of JIT than increasing the customer their costs. (EVAL). Customers Expect their With JIT this Which could Because the deliveries may no make the supplier may the next day longer be customer not have if ordered by possible and have to enough 18.00. the customer order from other may have to elsewhere. customers to wait longer. stop supplying CL, whereas the customer is likely to have greater choice of where to buy clothes from. (EVAL EVAL). However this depends on how much extra time the customer will have to wait for delivery (EVAL EVAL EVAL).

Question 5

Fish and Chips (FC) Min is a sole trader who is the owner and overall manager of FC. Min started the business as a restaurant but FC has gr…

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2(a)(i) Define the term ‘unique selling point’ (line3). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content • Different/differentiates about a business’s product/service • Factor or feature Exemplar Mark Rationale A factor that differentiates a product 2 Full definition from its competitors A feature that differentiates a product 2 Implied competition service A feature that sets you apart from 2 Full definition competitors No relation to A special feature of your product 1 competition 2(a)(ii) Briefly explain ‘Herzberg’s motivation theory’ (line 18). 3 Award one mark for each point of explanation: Knowledge Marks Example or some other way of showing good C* 1 understanding Explaining hygiene and motivating: B e.g. may motivate but will not demotivate and 1 e.g. do not motivate but may demotivate A Identifying ‘Hygiene factors’ and ‘motivating factors’ 1 *C is dependent on A and B being identified Content Herzberg’s two factor theory; Motivating factors – may motivate but will not demotivate, e.g. unexpected bonuses, praise, etc. Hygiene factors – do not motivate but may demotivate, basic pay, health and safety, etc. Exemplar Mark Rationale Hygiene factors which may demotivate and motivation which does not 3 A, B and C covered demotivate but motivates e.g. a bonus (is a motivator) Hygiene factors which may demotivate and motivation which does not 2 A and B only demotivate but motivates Identification not Motivating factors and hygiene factors 1 explanation Keeping your staff happy and motivated 0 Too vague / one only Bonuses are a motivating factor 0 No A or B Herzbergs theory is about motivation/ 0 TV two factor theory 2(b)(i) Using Table 1, calculate the total annual profit for FC. 3 Rationale Marks Correct answer with or without correct working 3 Two correct percentage calculations 2 Correct percentage calculation or formula 1 No creditable content 0 Content Formula = TR – TC OR Profit margin × annual revenue 2% of $50 000 = $1000 1% of $70 000 = $700 15% of $200 000 = $30 000 Total profit = $31 700 Rationale Marks 31 700 with or without working 3 1000 + 700 + 30 000 2 100 + 70 + 3000 = 3170 (one error – decimal place) 2 OFR (formula wrong way round) 2 18% of 320 000 = 57 600 1 Revenue × profit margin 1 2(b)(ii) Explain one problem that Min might have in allocating costs. 3 Level Knowledge and Application Marks Explanation of a problem of allocating costs in 2b APP 3 context Explanation of a problem of allocating costs no 2a (APP) 2 context 1 (K) Identification of a problem of allocating costs 1 0 No creditable content 0 Content • May make one aspect of the business seems unprofitable – however all interdependent • If a fish is bad/inedible – which part of the business should have the waste as a cost? • The restaurant and kitchen are part of the same building – how can costs be separated (utilities, rent etc.) • The kitchen staff could easily be seen as restaurant staff • Min makes the decision – what qualifies her as able to allocate the costs? ARA Explanation Problem (K) Possible context (APP) (APP APP) Separating similar How would which costs E.g. kitchen or costs apply to each area restaurant To be able to know May not have E.g. is the chef which costs are in which appropriate skills secondary or tertiary area 2(c) Analyse two appropriate ways that could be used to measure the size of 8 FC. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows Developed analysis of understanding of two 2b 4 two ways to measure 4 ways to measure the the size of FC size of FC Shows Developed analysis of understanding of one 2a 3 one way to measure 3 way to measure the the size of FC size of FC Shows knowledge of Limited analysis of two 1b two ways to measure 2 ways to measure the 2 the size of a business size of a business Shows knowledge of Limited analysis of one 1a one way to measure 1 way to measure the 1 the size of a business size of a business 0 No creditable content Note profit is NOT an acceptable measurement of size – 0 marks FC is a sole trader so share price is a non-contextual answer Content • Revenue – whole business or individual part. What to compare it to? • Number of customers – only applicable to the restaurant • Number of employees • Capital employed – kitchen, restaurant, boat, etc. • Market share 2(c) Examples Examples of Examples of Examples of possible of ways application/ possible developed analysis context analysis Can compare So that Min/potential Revenue 31 700 with other investors can judge the businesses success of the business However is only Number of Who buy fish Will tell Min the applicable to the customers and chips size of her market restaurant Shows Min how However does not take Number of E.g. 3 chefs much growth year into account productivity/ employees on year automation Kitchen, boat Which may attract future Capital Can show growth and investors/ allow bank employed over years restaurant loan Market Met growth Satisfied initial However the market may share objective objectives have shrunk 2(d) Evaluate which stakeholders might be most affected by the change in 11 FC’s business objective from growth to profit maximisation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) A justified judgement based on a developed argument of 7 at least two stakeholders A developed judgement based on a developed 6 argument of at least two stakeholders A basic judgement based on a developed argument of at 5 least two stakeholders Arguments based on how two Shows understanding of or more stakeholders may be how two or more 4 4 affected by the change in stakeholders in context business objectives in context Argument based on how one Shows understanding of stakeholder may be affected how one stakeholder in 3 3 by the change in business context objectives in context Limited analysis of how two Shows knowledge of two stakeholders may be affected 2 stakeholders by the change in business 2 objectives Limited analysis of how one Shows knowledge of one stakeholder may be affected 1 stakeholder by the change in business 1 objectives No creditable content 0 Content • Min – as owner this may increase her personal income – better lifestyle, etc. • Employees – may see a reduction in costs as a way of increasing profits, so may lead to redundancies or cut in wages, longer hours, etc. • Customers – may be lower quality standards (costs cutting) and prices may increase • Government – increase in taxation revenue • Local community – increased trade, noise, etc. • Competitors – May see a chance to compete with lower prices, attracted by higher profit margins. ARA

Question 6

Candy Planet (CP) CP is a public limited company which sells candy (sweets) to its national market and international markets. CP has benefi…

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2(a)(i) Define the term ‘internal growth’ (line 2). 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: • Definition of growth – expansion, getting bigger, opening more stores/factories/outlets, etc. (1) • Definition of internal (in terms of growth) – using own funds/resources, reinvesting, etc. or in terms of NOT merging/taking over another business (do not allow not external) Content Internal growth comes from an increase in sales from re-investment in the business (1) as opposed to mergers and takeovers (1). Exemplar Marks Rationale Expansion by reinvesting profits as 2 Both elements opposed to a merger Growth by using the businesses own 1 One element only – do funds. It is also known as organic growth not reward ‘organic growth’ as it does not define the term Getting bigger but not external 1 One element only – do not allow ‘not external’ Growth by using internal funds 0 Tautology 2(a)(ii) Briefly explain the term ‘capital intensive (line 9). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing further/good 1 understanding, e.g. Car manufacturing, Transport (airports, railways), could be more efficient than labour intensive, could demotivate, increased costs B As opposed to labour/workers, etc. 1 A Use of machinery, technology plant & machinery, IT systems, 1 buildings, vehicles, offices, equipment, etc. Note: C mark MUST only be awarded once A and B have been awarded. Content Operations carried out mainly with the investment in machinery or other items that are purchased with cash and man-made as opposed to the use of labour. ARA Answer Mark Rationale Machinery (A) not labour (B) which allows a 3 All three elements – business to operate 24 hours a day (C) allow any point which shows further/good understanding for the C mark A good example of capital intensive is the 3 All three elements – the car industry (C) because it uses robots (A) order of the points does to make cars rather than people (B) not matter Capital intensive is the opposite of labour 2 A and B – no intensive (B). This means that the business further/good has chosen to invest in technology (A) understanding rather than people Where large amounts of capital have been 1 Use of the word ‘capital’ used as opposed to labour (B) is a tautology – however B can still be awarded Production where large amounts of money 1 A only – C cannot be need to be invested in machinery (A). This awarded without B would allow the business to operate 24 hours a day and be more productive When a business uses capital intensively 0 Tautology 2(b)(i) Refer to Table 2.1. Calculate the percentage market growth in the 2 international market for candy. Rationale Marks Correct answer with or without correct working (no % sign 2 required) Formula or correct calculation of change in market size (i.e. 1 1.5 bn) No creditable content 0 Content Change in market size × 100 Original market size $61.5 bn – $60 bn = 1.5 bn $1.5 bn × 100 $60 bn = 2.5% 2(b)(i) Common incorrect answers Answer Marks Rationale 2.5 2 Correct answer – no % sign required 61.5 1 Worked out as a ratio × 100 = 102.5 60 1.5 (no working) 1 Correct calculation of the change in market size – no $ sign needed 1.5 1 Candidate has used the wrong base figure 61.5 × 100 = 2.4% – one error (OFR) 60 1 Figures used the wrong way round in 61.5 × 100 = 97.56 formula – one error (OFR) 100 – 97.56 = 2.44% 1.5 1 Not turned into a percentage – one error = 0.025 60 0.025 (no working) 0 Without working this is a meaningless number – do not reward Year 2 1 A mistake in the formula, but correct use of × 100 numbers Year 1 = 102.5% 2(b)(ii) Explain two ways in which CP’s marketing may differ between its national market and international markets. Level Knowledge and Application Marks 2b Explanation of two ways in which CP’s marketing 4 (APP + may differ between national and international APP) markets 2a Explanation of one way in which CP’s marketing 3 (APP) may differ between national and international markets 1b Identification of two differences between marketing 2 (K+K) for national and international markets 1a (K) Identification of one difference between marketing 1 for national and international markets 0 No creditable content 0 Content Product • Different products to meet different tastes/fashions in other countries • Legal requirements for ingredients in different countries Price • Different elasticities – in some countries candy may be a luxury, whilst in others it might be a normal good (or even an inferior good when compared to chocolate, etc.) • Different pricing strategies based on PLC in that country (i.e. recently launched a new candy range) Promotion • Language/cultural issues in different countries • Below the line may be difficult in international markets (i.e. distance form CP) • Above the line may be very expensive across international markets, especially for what is probably a low margin product Place • Possible to sell directly in national market (although unlikely) but unlikely in international markets unless through internet • Need to use retailers in international markets – may also need to use other forms of distribution. • Candy may be sold in different places in different countries (i.e. petrol stations, supermarkets, candy shops) 2(b)(ii) ARA Example of how responses should be marked Identification of a way (K) Explanation of a way in context (APP) The packaging might need to be So that the ingredients are translated into different (K) different languages (APP) The product may need to So that different flavours can be used in change (K) different countries (APP) Note: using the words ‘candy’ or ‘sweets’ is not enough for APP – however words such as ‘flavour’ and ‘ingredients’ and ‘taste’ do show contextual understanding and can be awarded with APP 2(c) Analyse one internal source of finance and one external source of finance 8 which CP could use for the new machinery. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding 4 Good analysis of one 4 of one internal and internal and one one external source of external source of finance finance in context 2a Shows understanding 3 Good analysis of one 3 of one internal or one internal or one external external source of source of finance in finance in context context 1b Shows knowledge of 2 Limited analysis of one 2 one internal and one internal and one external source of external source of finance finance 1a Shows knowledge of 1 Limited analysis of one 1 one internal or one internal or one external external source of source of finance finance 0 No creditable content 0 Note: Do not accept retained earnings or bank loan as contextual. These can gain K and AN but not APP and DEV. Annotate the internal source of finance in the left-hand margin and the external source of finance in the right-hand margin. If the candidate has attempted to analyse more than one internal or external source of finance, then annotate the one that gains the most marks for the candidate. Content Internal: • Sale of unwanted assets – old machinery that is of no use • Sale and leaseback of non-current assets – unlikely to have many current assets that could be leased • Working capital – CP has a good working capital position External: • Share capital – CP is a plc so can sell shares, but will this devalue the share price? Note: only accept share capital as an EXTERNAL source unless it is explicitly stated that the shares are being issued to existing shareholders • New partners – not a partnership so not contextual • Venture capital – more likely for a newer business – VC is likely to require a high return and/or equity in the business • Overdrafts – surely too much for an overdraft • Leasing – possible advantages of maintenance and no need for initial sum but likely to be more expensive long term 2(c) • Hire purchase – as above • Mortgages – suitable for properties so unlikely to be contextual • Debentures – securing a debenture on the machinery may make a financial institution/individual more likely to lend the money • Micro-finance – likely to more suitable for new businesses/ventures • Crowd funding – likely to more suitable for new businesses/ventures • Government grants If a candidate has mis-categorised a source of finance (internal and external) then do not award any marks for that source of finance, e.g. share capital as internal ARA Example of Examples of Examples of possible analysis (AN + an internal application/context DEV) source of (APP) finance (K) Sale of CP has 20 separate By selling these machines, CP would assets (K) production lines gain the cash from the sale to be able to which would involve finance the new machinery. However, a lot of machinery to this may leave CP without any means of sell (APP) producing Candy, leading to a loss of revenue (DEV) Example Examples of Examples of possible analysis (AN + of an application/context DEV) external (APP) source of finance (K) Sell shares CP is a public So by selling shares this can release (K) Limited Company cash to finance the purchase of the (APP) machinery (AN), however this may lead to a loss of control by the current owners (DEV) Lease (K) Because CP cannot This does not require an initial large use a bank loan they amount (AN) and allows CP to pay for the might need to lease machinery each month (DEV) the machinery (APP) 2(d) Evaluate the likely benefits for CP of the proposed process innovation. 11 Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified evaluation based on 7 argument in context Developed evaluation based 6 on argument in context An evaluative statement based 5 on argument in context Shows understanding of 4 Argument based on the use of 4 two aspects process two benefits to CP of the innovation in context proposed process innovation Shows knowledge of one 3 Argument based on one 3 aspect of process benefit to CP of the proposed innovation in context process innovation Shows knowledge of two 2 Limited analysis of two 2 aspects of process benefits of process innovation innovation Shows knowledge of one 1 Limited analysis of one benefit 1 aspect of process of process innovation innovation Note: there must be knowledge of process innovation (not just innovation) to award any marks. Content Process innovation is the implementation of a new or significantly improved production method. This includes changes in how the product is made and/or the equipment used. Aspects of process innovation may include: • How the product is produced • The equipment used to produce the products • The technology used in production 2(d) Benefits may include: • Possible economies of scale from moving from 20 production lines to only one or may eliminate the current diseconomies • Expansion of CP’s product portfolio • Mass customisation – could have more varieties of their current candy – may be able to have specific candy for organisations • Can customise candy for national and international markets – especially important because of the growth in the international market • Replace the 25-year-old machinery – more efficient? • Save direct costs by making workers redundant • Increased efficiency ARA An example of how an answer could develop and how it should be annotated K APP AN DEV EVAL Changing Introducing May lead to Which may The most important how the mass being able to increase the benefit is that CP candy is customisation produce target will be able to made (K) (APP) more types of market and increase their candy (AN) number of profitability (EVAL) customers because as public (DEV) limited company the shareholders Changing Moving from May reduce Leading to will expect a the 20 production the CP being reasonable machinery lines to just 1 diseconomies able to dividend (EVAL). used (K) (APP) of scale (AN) make more However, in the profit (DEV) long term it may be more important to increase the number of customers as this is likely to lead to more profits eventually (EVAL)

Question 7

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 8

Quality Furniture (QF) QF is a public limited company in country S. It manufactures furniture for cafés. The number of cafés in country S h…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘buffer inventory’ (line 18). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Indicative content AO1 Knowledge and understanding The (minimum) level of stocks/components/supplies – a business aims to hold to ensure orders can be met/point at which business re-orders. A correct definition should include: • an understanding of inventory • an understanding of buffer. Exemplar Marks Rationale Minimum stock level 2 Both buffer and inventory defined Minimum level of inventory 1 Inventory not defined 1(a)(ii) Explain the term ‘internal economies of scale’ (line 3). 3 Award one mark for each point of explanation: C Example or some other way of showing good 1 mark understanding, i.e. can arise from bulk buying, technical/managerial efficiencies, etc. B Understanding of internal economies of scale, 1 mark e.g. Internal economies arise from the growth of the business A Understanding of economies of scale (when 1 mark unit/average costs fall as output rises) Indicative content AO1 Knowledge and understanding • Economies of scale occur when unit/average costs fall as output rises. • Internal economies arise from the growth of the business, e.g. technical economies. AO2 Application Application of an internal economy of scale to a business, such as: • An example of a type of internal economy of scale. • A description of an internal economy of scale that a business might benefit from. Exemplar Marks Rationale Average unit costs decrease (A) as a 3 A + B + C result of the increase in the scale of operations (B), e.g. purchasing economies (C) Reduction in costs per unit (A) as a 2 A + C (growth of result of trading on a large scale, e.g. business not bulk buying (C) mentioned, so no B mark) Fall in costs per unit (A) 1 A only 1(b)(i) Calculate QF’s profit margin for 2020. 2 Rationale Marks Correct answer with or without correct working 2 Formulae/attempt to calculate/calculation of profit 1 No creditable content 0 Content Gross profit – expenses, interest and tax = profit $180m – $150m = $30m (1) OR Profit / Revenue × 100 = profit margin (1) 30 / 300 × 100 Profit margin = 10% Accept 10 (2) Common incorrect answers Exemplar Marks Rationale 10 2 Correct answer – % not needed 60 1 Gross profit (180/300) × 100 = 60% 30 1 Correct profit figure but not profit margin Profit / Revenue × 100 1 Formula 30 / 300 × 100 1 Correct figures but calculation incomplete 1(b)(ii) Explain two ways QF could increase its profit margin. 4 Level Knowledge and Application Marks 2b (APP Explanation of two factors which would increase the 4 +APP) profit margin, in context 2a Explanation of one factor which would increase the 3 (APP) profit margin, in context 1 (K) Identification of two factors affecting the profit margin 2 1 (K) Identification of one factor affecting the profit margin 1 0 No creditable content 0 Content Increase quantity sold without a change in costs / price Increase price whilst maintaining sales Reduce costs without change in quantity sold / price Indicative content AO1 Knowledge and understanding Ways of increasing the profit margin: • to decrease costs • to increase revenue • increase/decrease price AO2 Application Application to QF, including: • QF’s costs – internal economies of scale achieved, so costs will reduce and improve profit margin/buy cheaper wood/decrease inventory holdings as high value, bulky so reduce overhead costs. • QF’s revenue – likely to increase due to 50% growth in cafes over last 5 years/may be difficult due to increased competition/could improve quality to reduce customer complaints and increase sales. • Increased price difficult in competitive market/may be able to decrease price due to lower costs leading to increased revenue. 1(b)(ii) Example of how responses should be marked. Identification of a way Application (K – 2 marks) (APP – 2 marks) Reduce cost of sales by opting for cheaper timber Increase revenue by increasing of its tables and chairs quality Increase revenue from 2020 it earned $300m; they should boost this potentially by increasing the price Decrease cost by buying raw by buying from a supplier in country materials from a cheaper supplier S rather than country T Reduce stock to decrease costs buffer inventory is high value and bulky so can reduce overhead costs ARA 1(c) Analyse two disadvantages to QF of holding a high level of inventory. 8 Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Shows understanding 4 Good analysis of two 4 of two disadvantages of disadvantages of holding a high level of holding a high level of inventory inventory 2a Shows understanding 3 Good analysis of one 3 of one disadvantage of disadvantage of holding a high level of holding a high level of inventory inventory 1b Shows knowledge of 2 Limited analysis of two 2 two disadvantages of disadvantages of holding a high level of holding a high level of inventory inventory 1a Shows knowledge of 1 Limited analysis of one 1 one disadvantage of disadvantage of holding a high level of holding a high level of inventory inventory 0 No creditable content Indicative content Purpose of inventory within a business (raw materials, work in progress, finished products). . AO1 Knowledge and understanding Knowledge of a disadvantage of holding a high level of inventory, including: • cost • security required • waste/damage • storage space could be utilised for other purposes AO2 Application • Number of cafes increased by more than 50% over last five years. • QF has expanded. • Growth of market has attracted new firms. • Cost of sales = $120m (40% of revenue). • 80% of materials from country T, long delivery lead time. • High value, high level of buffer inventory. • QF wants to reduce costs. • Cost of storing may reduce ability to pay higher wages, so trained staff leaving. • PLC – effect on shareholder value. 1(c) AO3 Analysis Disadvantages may include: • costs – high costs of holding stock leading to lower profits affecting shareholders as dividends lower, and may lower share price affecting shareholder value • storage space – could be used elsewhere, e.g. expand manufacturing without needing new premises • security – high value, worth stealing so will require good security measures and expensive insurance • waste/damage – wood furniture, storing for a long period could dry out wood, make it susceptible to damage, e.g. leaks, also could go out of fashion and become obsolete • more management required – ensure stock rotation to avoid any component remaining in store for a long period where it may be damaged/not fit for purpose Examples of how an answer could develop and how it should be annotated. K APP AN DEV High storage opportunity extra outflow of this is a costs cost as money cash to pay for disadvantage as could be used fixed cost employees have for motivating complained employees about low pay, and employee dissatisfaction has reduced quality Capital is tied such as paying reduces working they may face up in stock for the training capital difficulties which would of new recruits paying day-to- have to be sold to replace day expenses those who and short term have left debts 1(d) Recommend how QF’s management could improve the morale of its 11 production employees. Justify your recommendation. Knowledge and Analysis and Application Evaluation Marks Marks (4 marks) (7 marks) Annotation Annotation A justified + + recommendation 7 based on a developed EVAL EVAL EVAL two-sided argument A developed + recommendation 6 based on a developed EVAL EVAL two-sided argument A basic recommendation 5 based on a developed EVAL two-sided argument Shows understanding Developed analysis of + + of more than one more than one 4 method of improving APP method of improving DEV APP DEV morale in context morale in context 3–4 Shows understanding Developed analysis of of one method of one method of 3 improving morale in APP improving morale in DEV context context Limited analysis of Shows knowledge of K + more than one at least two methods + 2 AN K method of improving AN of improving morale 1–2 morale Shows knowledge one Limited analysis of method of improving K one method of 1 AN morale improving morale No creditable content 1(d) Indicative content AO1 Knowledge and understanding Knowledge of methods to improve morale including: • financial – higher payments/bonus/change payment method/award shares in company • non-financial – team working, increase holidays, employee participation encouraged, management style (democratic/laissez-faire as highly skilled), job rotation, promotion opportunities/training AO2 Application Application of morale to QF’s production workers, may include: • low morale of employees leading to a fall in quality and a rise in customer complaints • skilled/highly trained labour leaving leading to high recruitment costs • profits doubled but employees seen no benefit • PLC so employee share ownership could work • highly trained and highly skilled, so more training unlikely to work • increase in competitors willing to attract highly skilled employees from QF AO3 Analysis Analysis of methods may include: • financial morale boosters, e.g. pay increases; employees have not received a pay increase in three years although profits at QF have doubled • non-financial morale boosters, e.g. increase in holidays – employees’ suggestion, promotion opportunities, job redesign, ask employees’ advice on reducing stocks/efficiencies, etc. AO4 Evaluation • A recommendation about how QF’s management could improve the morale of its production employees. • A judgement over the relative suitability of the chosen method(s). • Elements that the recommendation could depend upon, including costs v benefits, employee views, e.g. already highly skilled so more training unlikely to improve morale, competitors’ pay and conditions should be considered. • Weighing up of the impacts on QF/employees – employees complaining about pay and bonuses so increasing these more likely to improve morale. Ownership of shares gives a greater stake in the company, so QF’s objectives (e.g. growth, profits, quality) become the employees’ objectives/employees likely to want to improve quality and reduce customer complaints/increase profits/ensure loyalty so less likely to move to a competitor firm. 1(d) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Increase can be one increase in productivity increase wages as profits pay will make will increase (wages) is have doubled them work and quality the best way over the last harder may improve to increase 3 years sales morale (eval) as the Introduce suitable for this will lead and lead to employees piece furniture to more units increased do not think rates manufacturin being profits but their pay is g as division produced quality may fair (eval – of labour can go down as justifying be used employees recommenda rush to tion), this has produce a affected the higher quality of the quantity furniture. Increased quality can increase sales and revenue to offset the increase in wages (eval – balancing costs against revenue) ARA

Question 9

Child Play (CP) Su is a sole trader who started a business called CP which operates a play area for children. The play area is inside a bui…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘supply’ (line 7). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content: The ability and willingness for a business to produce products or services to the market at a given price (2). Award one mark for each partial element of a definition, for example:  The quantity of products/services produced/able to produce/willing to produce  At a given price/over a period of time 1(a)(ii) Explain the term ‘product differentiation’ (line 17). 3 Award one mark for each point of explanation C Example or some other way of showing good 1 mark understanding B Understanding of differentiation 1 mark A Understanding of product 1 mark The process of distinguishing a good or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own products. Note: Can get A+B with a good example. If already have A+B mark, then example can get the C mark ARA Exemplar Rationale Marks When a business service (A) All three elements 3 is different from its competitors (B) e.g. Tesla cars can be customised (C) A shoe (A) that is higher A+B 2 quality than competitors (B) Having a distinct product B only 1 compared to competitors (B) Ability of customer to No explanation of product or 0 recognise a product differentiation Introducing a new product to NAQ 0 your portfolio 1(b)(i) Calculate the price elasticity of demand if Su increases the price from 3 $10 to $15 an hour. Rationale Marks Correct answer with or without correct working or minus sign 3 Formula and correct calculation of one change percentage or 2 correct calculation of both change percentages Formula or correct calculation of one change percentage 1 No creditable content 0 Content: Percentage change in quantity demanded = PED (1) or Percentage change in price 40% (1) = –0.8 50% (1) Answer = –0.8 (3) allow 0.8 OFR Exemplar Rationale Marks 0.8 correct answer 3 %change in P/%change in Inverted formula but 2 QD = 0.5/0.4=1.25 percentages correctly calculated %change in QD=50% Calculation of one change 1 only change in P/Change in Incorrect formula, no 0 D=5/4=1.25 percentages just change. 1.25 No workings 0 1(b)(ii) Explain one way in which the size of CP can be measured. 3 Level Knowledge and Application Marks 2b (APP) Explanation of one factor in context 3 2a (K+K) Explanation of one factor 2 1a (K) Identification of one factor 1 0 No creditable content 0 Note: profit is not an appropriate measure of size Content:  Number of customers who book CP’s services, or number of customers who use the café – because the more customers, the bigger the business is likely to be.  Revenue gained from selling CP’s services or goods from the café – because the more revenue, the higher the value of goods and services and therefore the larger the business.  Size of the building owned (or rented), to compare against similar businesses – for example a café with twice the space of CP would be bigger.  Capital invested – for example the value of the building where CP is located – this reflects the assets of the business and therefore the size.  Number of employees – only Su appears to work for CP so must be a small business  Market share – in comparison to competitors – CP’s is likely to be small as only one store and is a sole trader. ARA 1(c) Analyse one advantage and one disadvantage to Su of using working 8 capital as a source of finance for the new café. Knowledge and Level Application Marks Analysis (4 marks) Marks (4 marks) 2b Shows 4 Good analysis of 4 understanding of one advantage and working capital as a one disadvantage in source of finance in context (DEV+DEV) context (APP+APP) 2a Shows 3 Good analysis of 3 understanding of one advantage or source(s) of finance one disadvantage in in context (APP) context (DEV) 1b Shows knowledge of 2 Limited analysis of 2 working capital as a one advantage and source of finance one disadvantage (K+K) (AN+AN) 1a Shows knowledge of 1 Limited analysis 1 source(s) of finance one advantage or (K) one disadvantage (AN) 0 No creditable content Content: Working capital = current assets – current liabilities / the amount of internal finance available for day-to-day expenses Advantages:  No finance costs – as a sole trader, Su may not be able to afford extra costs in her business.  Immediately available – would allow Su to benefit from quicker income from the café, especially important as she plans to open it in four weeks. Disadvantages:  May leave CP financially unable to face future issues – will Su have any funds left if CP needs extra money? What if the café costs more than she expects, does Su have any other funds to support this?  May leave Su unable to pay CP’s bills – this might lead to the cafe having to shut down which may lead to the end of the CP. Risking current business to fund new venture. ARA 1(d) Evaluate appropriate promotion methods that Su could use for the new 11 café. Analysis and Knowledge and Marks Evaluation Marks Application (4 marks) (7 marks) Justified evaluation 7 based on argument in context (EV+EV+EV) Developed evaluation 6 based on argument in context (EV+EV) An evaluative statement/ 5 based on argument in context (EVAL) Shows understanding of 4 Argument based on two 4 two promotion methods promotion methods in in context (APP+APP) context (DEV+DEV) Shows understanding of 3 Argument based on one 3 one promotion method in promotion method in context (APP) context (DEV) Shows knowledge of two 2 Limited analysis of two 2 promotion methods promotion methods (K+K) (AN+AN) Shows knowledge of one 1 Limited analysis of one 1 promotion method (K) promotion method (AN) No creditable content Content: Below the line methods are likely to be more cost effective and suitable than above the line – however, local above the line methods may also be suitable.  CP’s website – already up and running and used by family customers. Low cost (possible zero marginal cost) but may not bring in enough new customers. Would it be enough to just have current customers?  Local newspapers – likely to be low cost and target the local market – may be able to place advertisement in a part of the newspaper which would appeal to parents.  Local television – unlikely to be low cost or able to create within four weeks. However, could effectively show where the café is and communicate the USP. 1(d)  Social media – could be effective in targeting parents (plenty of social media pages dedicated to this) but will it allow Su to focus on the local market?  Word of mouth – this is what Su uses for the play area, but would this bring in enough customers to make the café a success? – only five children each hour in the play area, would need more than this to generate business for a café. Focused on target market, but can Su control this and rely on it?  Posters in local schools/libraries/toy shops – likely to hit target market – but some of the places might have their own cafes and not be willing to advertise Su’s. ARA

Question 10

Move Well (MW) MW is a business that organises the transportation of people’s possessions when they move from one house or apartment to ano…

Accepted Answer

2(a)(i) Define the term ‘corporate objectives’ (line 3). 2 Knowledge Marks Reference to long term goals/over a period of time or 2 focus/direction or helps form strategic business plan / should be SMART Reference to goals/aims/targets 1 No credible content 0 A correct definition could cover the following: • The (long term) goals of a company • Give focus and direction to the business. Exemplar Rationale Marks The long-term goals of a Two elements covered 2 company Goals of a company giving Two elements covered 2 direction to employees Gives focus to a business A simple statement 1 Company goals An understanding but too vague 1 Aims Vague but alternative for 1 objectives 2(a)(ii) Explain the term ‘internal growth’ (line 3). 3 Award one mark for each point of explanation Point Knowledge Marks C Example or some other way of showing good 1 understanding – by means of opening new branches, shops, factories. Contrasts with external (takeovers, mergers etc.) B From within – organic 1 A Expansion of a firm/business. 1 Content: Internal/organic growth is when a business uses its own funds to reinvest in itself and increase the capital. Exemplar Rationale Marks Increase of the business scale All three elements 3 (A), from within (B), does not involve external parties such as mergers (C) Expansion of a business, from All three elements 3 within, which can be slow when compared with external growth through a merger Expansion of a business, from All three elements 3 within, which requires investment to open new branches Expansion of a business, from A and B 2 within, which can take a long time and requires investment Slow growth of a business. B only 1 Expansion of a business Identified key themes only, no 1 real understanding Increase market Not necessarily growth as e.g. 0 share/employees market share could increase because of successful promotion without growth 2(b)(i) Refer to Table 2.1. Calculate the forecast profit margin for year one. 3 Rationale Marks Correct answer (with or without formula or %) 3 Correct calculation of profit 2 Correct formula 1 No credible content 0 profit  100 sales revenue Profit = 110 – (50+20) = 40 40 110 = 36.36% allow 36, 36.3, 36.4 (3) Common answers Answer Mark Rationale 36.3% 3 Correct answer 110-70 = 40 2 Correct calculation of profit 40/110 2 Correct calculation of profit Profit/sales revenue  100 1 Correct formula Profit/sales revenue 0 Incorrect formula (no  100) 2(b)(ii) Explain one method MW could use to improve its cash flow. 3 Level Knowledge and Application Marks 2 (APP) Explanation of one method to improve cash flow in 3 context 1b (K+K) Explanation of one method to improve cash flow 2 1a (K) Identification of one method to improve cash flow 1 0 No creditable content 0 • Reducing costs – to reduce outflow • Increasing revenue – to increase inflow • Bank overdraft • Debt factoring Context is likely to come from: • The time between booking and receiving revenue • Higher costs due to inefficiency in systems • Take a deposit at the time of booking ARA Exemplar Mark Rationale Take a deposit at the time of booking a 3 Explanation in context move to increase revenue Reduce costs by finding a cheaper 2 Explanation of method supplier Get a bank overdraft 1 Identification only 2(c) Analyse two benefits to MW of introducing process innovation to update 8 its information systems. Level Knowledge and Marks Analysis Marks application Annotation 2 Understanding of 4 Developed 4 two benefits of analysis of two process benefits of DEV APP innovation in + process + context APP innovationcontext in DEV Understanding of 3 Developed 3 one benefit of analysis of one process benefit of process innovation in innovation in context APP context DEV 1 Knowledge of two 2 Limited analysis of 2 benefits of two benefits of AN process K+ process + innovation K innovation AN Knowledge of one 1 Limited analysis of 1 benefit of process one benefit of innovation process K innovation AN 0 No creditable content 0 ARA Indicative content AO1 Knowledge and understanding • Information – keep up-to-date, • Time saved • Increase cash flow • Reduce costs • Increase quality • Increase efficiency • Ease of access to information AO2 Application • Wants to achieve internal growth • Many locations in country Q • Successful business • Growth affecting cash flow 2(c) • Want to locate to other countries • Want to achieve cost savings • Current system uncoordinated • Use paper customer records • 3 different computer-based systems • Records not kept up to date • Need to improve cash flow AO3 Analysis • Information – keep up-to-date, easier to co-ordinate • Time saved – quickly find the correct information • Increase cash flow – Decrease the time between booking and receiving revenue • Reduce costs – improve profit/help fund expansion 2(d) Evaluate the factors that John needs to consider before opening the 11 new location in country P. Knowledge and Marks Analysis and Marks Application (4 Evaluation marks) (7 marks) Annotation Annotation A justified 7 judgement on the + + importance of each factor EVAL EVAL EVAL A judgement on the 6 + importance of each factor EVAL EVAL An evaluation 5 statement of the given arguments of two factors in context EVAL Understanding of + 4 Developed analysis 4 + two factors in of two or more context APP APP factors in context DEV DEV Understanding of 3 Developed analysis 3 one factor in of one factor in context APP context DEV Knowledge of two + 2 Limited analysis of 2 + factors K K two factors AN AN Knowledge of one 1 Limited analysis of 1 factor K one factor AN No creditable comment 0 Indicative content AO1 Knowledge and understanding • Language barriers, • Costs, • Opportunities, • Competition, • Available resources • Infrastructure • Communication 2(d) AO2 Application • Growth in housing demand in other countries. • Business successful in the past • Decline in sales in country Q • Fewer people moving in country Q • Each city location made a loss last year • Requires good transport infrastructure • Tracking vehicles requires a good communication system AO3 Analysis • Expensive to set up operations in another country, can MW afford it? • Might be a competitive market so hard to break into • Might be legal barriers such as licence requirements • Will require employees in the new country adding to expense • Important to consider culture of new country – will it be a good fit for MW? AO4 Evaluation • Inefficient operation – should they expand internationally if own business inefficient • Will need to spend a lot on infrastructure in another country, can they afford it if made losses last year • Inefficient systems could be a major issue when trying to coordinate internationally • But declining market in country Q • Need to research carefully before making a decision • Will take a long time to establish ARA

Question 11

Gold Theme Park (GT) Gold Park was a mine where gold was extracted until 2012. Although there was still some gold in the mine, the direct c…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one type of training. 1 Indicative content. Identification of a type of training: • Induction • On-the-job • Off-the-job Only accept these responses 1(a)(ii) Explain the term ‘direct costs’. 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 direct cost(s) may include: • Costs that are directly related to the production process. • Costs that are directly attributed to operations/a cost centre. No further marks can be gained without knowledge and understanding AO2 Application Limited application applies knowledge of direct to business costs, including: • Amounts/things that are payable by a business / incurred by a business OR • Example or some other way of showing good understanding of a direct cost. Developed application + applies knowledge of direct to business costs, including • Amounts/things that are payable by a business / incurred by a business AND • Example or some other way of showing good understanding of a direct cost. Accept all valid responses. 1(a)(ii) Exemplar and annotations Mark Rationale Costs which are linked to the operations of a business 3 An answer which starts with the knowledge and then . For example, a gold mine would need to pay applies it to costs with an example. the miners who extract the gold . Something a business pays to make a product or 3 APP cannot be awarded without K, but once the K has service , such as raw materials . been awarded you can go back and reward the APP. Any example (it does not need to come from the data) can be used. Paid by a business , to produce a service . The 3 One of the APPs can come from further explanation it opposite of indirect costs which are not linked to does not have to be an example. production . Costs that are directly related to the production 2 No application of costs, so max 2 marks. process such as wages . Costs that can be attributed to a specific cost centre 2 Knowledge of the direct element with good unlike indirect costs which cannot . An example understanding. The example is fine, but no of a direct cost for GT are the wages of the tour understanding of costs. guides. Production costs . 1 Simple knowledge of the direct element. Costs which are directly accountable to a cost object 1 Knowledge of the direct element – ignore anything such as the marketing of GT. that is incorrect. No negative marking. The things a business has to pay . For example, a 0 Although there is some attempt at application, these marks cannot be awarded without knowledge. business may need to pay wages and advertising . Direct costs are the same as variable costs . 0 Variable costs share some characteristics with direct costs, but they are not the same. 1(b)(i) Refer to Table 1.1. Calculate the change in GT’s total costs between 2020 and 2022. 3 Indicative content. • Formula: total costs = total revenue – profit (1) • Calculation of cost in either 2020 or 2022 (1) – Costs in 2020: $3.4m – $0.9m = $2.5m – Costs in 2022: $2.8m – 0.2m = $2.6m • Change in costs: $2.6m – $2.5m = $0.1m (1 OFR) Answer = $0.1m (3) Accept answer as a percentage 4% (with % sign) as full marks Exemplar and annotations Marks 3 marks Correct answer Working and $ do not matter. $0.1m or 4% allow 0.1 If presented as a percentage, then % sign must be included for full marks allow OR clear and correct working shown. (0.1 / 2.5)  100 = 4 (obviously meant Must be three to denote the as a percentage) three marks. 2 marks Two of the following: To award two marks, there must be • Correct formula • Two and a • Correct calculation of TC for 2020 OR (2.5) • One , one and one • Correct calculation of TC for 2022 (2.6) OR An incorrect answer with one mistake allowing OFR for final stage. 1(b)(i) Marks 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correct calculation of TC for 2020 (2.5) • Correct calculation of TC for 2022 (2.6) 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one way to measure the size of GT. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding • Knowledge of an appropriate way to measure the size of a business; revenue, number of outlets, number of employees, market share, number of customers, market capitalisation capital employed, area/space etc. Do not allow profit – which is a measure of success or performance, but not size. No further marks can be gained without knowledge and understanding AO2 Application Limited application , applies knowledge to GT once. Developed application + applies knowledge to GT twice OR through the calculation or comparison of data (eg a percentage change). 1(b)(ii) • Use of data related to GT to show the size of the business (this data can be used more than once) 2020 2021 2022 Sales revenue ($m) 3.4 3.2 2.8 Number of 54 55 47 employees Profit ($m) 0.9 0.3 0.2 Number of visitors 0.8 0.8 0.65 (m) • GT includes a museum, tours, a roller coaster, restaurant, and gift shop • Some employees previously worked in the gold mine • Some employees are tour guides and customer service representatives Accept all valid responses. Exemplar and annotations Mark Rationale Number of employees , in 2020 GT had 54 3 Number of employees is a way to measure size and employees but this decreased to 46 in 2022 . the use of two data points shows developed application. The size of GT can be measured by revenue . GT’s 3 Revenue is a way to measure size and the candidate revenue decreased by 17.65% . has used two pieces of data (revenue for 2020 and revenue for 2022) to come to a correct calculation. It may be necessary to check calculations and allow for correct rounding. GT has got smaller since its visitors have 3 Visitors (customers) is a way to measure size and the decreased to 0.65m . use of two data points for developed application. 1(b)(ii) Exemplar and annotations Mark Rationale GT has gotten smaller, since their revenue has 3 Revenue is a way to measure size and the use of two fallen to $2.8m and its visitors have also fallen to data points for developed application. 0.65m . As a theme park, visitor numbers are an important 3 Visitors is a way to measure size. The context of a way to measure size, which has fallen to 0.65m in theme park is limited application (go back and award 2022 . after the K has been awarded) with a use of the data from Table 1.1 to develop this application. Number of employees has decreased to 46 in 3 Only limited application through the use of one data 2022 . point. It is not enough to state that it has ‘decreased’ – the figures must be used. The number of people that GT employs , such as 2 Application does not need to come from the data in the customer service operatives . Table 1.1. The number of visitors is really important because 1 No specific context used in this answer. the more visitors GT has, the more revenue it is likely to generate and the bigger its profit. This all stems from the visitors who are the customers of GT and therefore the most important way to measure the size of GT . The size of GT can be measured by the number of 1 AO1 knowledge does not need to be in context, so factories it has. The more factories the more it can can be awarded, even if the answer does not match produce. the context. A big business is likely to have more power in the 0 No valid way to measure the size of the business. market and can dominate the competition . 1(c) Analyse two possible sources of secondary market research that the Marketing Director could use to help improve 8 GT. AO1 Knowledge and AO2 Application AO3 Analysis Level 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 source in the left-hand margin and the second source in the right-hand margin. 1(c) Indicative content: AO1 Knowledge and understanding Knowledge of sources of secondary market research (max 2 s), include; • journal articles • textbooks • dictionaries and encyclopaedias • books • newspapers and magazines • accounts and reports • previous sales/internal data • competitor data • Data collected by other businesses • Feedback found on media / other sources – do not accept ‘internet’ unless the source is clear or other named internet source. No further marks can be gained without knowledge and understanding AO2 Application Max one for application in the first source and max one for application in the second source, including; • Link to leisure markets, such as days out and entertainment. • Link to specific competitors, such as other days out, services, museums. • Link to elements specific to GT, such as: – converted mine / gold mine – guided tours – roller coaster rides – entry prices of similar services – need to reduce price – need to make GT more fun. 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. Analysis may be of the cost and/or benefit and/or risk of the source of market research to GT. Costs may include: • Monetary cost of research – may affect the profitability of GT. • Time cost of research – opportunity cost of time spent on other activities. Benefits may include: • Understanding of the market to increase in visitor numbers – increased sales revenue. • Relatively lower cost than more primary market research – increased profit. Risk may include: • Use of secondary research to find out more about the market and potential visitors – to increase sales revenue/profit. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Newspapers . To spot trends in what people like Which can help GT increase their when visiting roller coasters in the sales revenue by selling more theme park. tickets and make a greater profit . Competitors websites To see what their prices are because So GT can set a better price for their some customers think GT’s prices are tickets and increase customer too high . satisfaction however the data might be outdated . 1(d) Evaluate the importance to the ongoing success of GT of developing intrapreneurship. 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 relevant key term(s) relevant point(s) to connections is 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 term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 1(d) Indicative content AO1 Knowledge and understanding Knowledge of intrapreneurship (max 2 s), including: • Intrapreneurship is where the workers come up with innovative ideas using enterprise to increase the profitability of the business. The business may reward the intrapreneur for their ideas. • Allows employees to act like entrepreneurs / introduce enterprise within the business (employed). • The qualities of intrapreneurship, including; passion, talent, curiosity, motivation, resourcefulness, networking, confidence, knowledge and experience. • the role of intrapreneurship, including: problem solving, idea generation, identify opportunities, overcome threats, empowerment. No further marks can be gained without knowledge and understanding AO2 Application Limited application applies knowledge of intrapreneurship to GT once. Developed application + applies knowledge of intrapreneurship to GT twice. • Link to leisure markets, such as days out and entertainment. • Link to elements specific to GT’s intrapreneurship, such as: – some employees used to work in the gold mine – good knowledge about the theme of GT – some employees are younger workers on flexible contracts – falling sales ($3.4m in 2020 to $2.8m in 2022 – 17.65% fall) – fewer employees in 2022 than 2021 – loss of intrapreneurship skills – falling profit ($0.9m in 2020 to $0.2m in 2022 – 77.78% fall) – link to ability to fund ideas – fall in visitors due to; not fun, too high prices. 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 of intrapreneurship to GT may include: • Using GT’s own resources to find solutions to their falling visitor numbers may be cheaper than external management consultants – lower GT’s cost and increase profit. • GT workers may provide better / more effective solutions to GT’s problems – more likely to increase visitor numbers. • Use of the mine’s previous employees for their intrapreneurial ideas may be more likely to improve the business – increase visitor numbers. • Asking for employee involvement may increase the motivation of the staff – increased productivity/sales revenue, 1(d) Disadvantages of intrapreneurship to GT may include: • GT’s employees (especially the younger workers on flexible contracts) may not have the experience and/or knowledge to help GT increase visitor numbers – opportunity cost of spending time on tasks other than their main function. • GT’s employees may not provide adequate solutions which may not increase visitor numbers – GT may make a loss in the future. • GT needs a quick solution (because profit is likely to become loss in the near future) and intrapreneurship may not provide this – visitor numbers may not increase leading to GT making a loss or not surviving. • GT already has two possible solutions (lower price and increase fun of the park), so a focus on intrapreneurial ideas may waste time – opportunity cost. 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 about the likely role of intrapreneurship in the ongoing success of GT. • What the judgement might depend upon; the timeframe that GT must find a solution to their falling visitor numbers, the ability/skill of GT’s workers, the ability/skill of Kayo to utilise the intrapreneurial skills of GT’s employees, the validity of GT’s previous primary market research, the findings of the secondary market research etc. • Weighing up of the arguments for the role of intrapreneurship to the ongoing success of GT. Accept all valid responses. 1(d) Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) Intrapreneurship is very important to Intrapreneurship is very important to Intrapreneurship is very important to the success of GT. the success of GT because it gives the success of GT because it gives the business new innovative ideas. the business new innovative ideas for roller coasters. Intrapreneurship is not as important Intrapreneurship is not as important Intrapreneurship is not as important as finance. as finance because without enough as finance because without enough money a theme park will not survive. money a theme park will not survive against all of the other leisure businesses in the market. It depends on how good the It depends on how good the It depends on how good the intrapreneurs are. intrapreneurs are. If they come up intrapreneurs are. If they come up with innovative ideas, then it is with innovative ideas about how to important. better use the gold mine, then it is important. In the short term it is, but in the long In the short term it is to bring in new In the short term it is to bring in new term it is not. ideas for the theme park, but in the ideas for the theme park, but in the long term having the right price may long term reducing the price that is too be more important. high may be more important.

Question 12

Brenda’s Bricks (BB) BB is a newly established social enterprise in country X. It was set up by Brenda. Brenda has no experience of running…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one potential risk to a business 1 Indicative content Responses may include: • lack or loss of customers/demand/reputation/image • financial – poor cashflow management/unexpected costs/low profits • competition – new competitors/new more superior competing products/new substitutes • IT failure/cyber-attack/supply chain disruption/pandemic/economic factors • operational/compliance/legal/strategic risks • changing external factors, e.g. poor economic climate • inexperienced managers • bankruptcy/insolvency/business failure Accept all valid responses. 1(a)(ii) Explain the term national business (line 2). 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 national business , may include: • in one country • within a country • only one country • only domestic AO2 Application Explanation of a national business may include: • the business only sells products (in one country) / sell • the business only operates (within a country) / trading • customers from (only one country) • (only domestic) target market / not worldwide or global 1(a)(ii) Context applied to national business , including: • any example of a national business, e.g. retailer with branches in one country • an example of a benefit or cost of being a national business Application can be made to BB/CC or any other scenario/context/business/person Do not reward vague answers, e.g. business that operates nationwide Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of a national business 1 mark Explanation Explanation of a national business 1 mark Context Applied to a business context/business environment 1 mark 1(b)(i) Refer to Table 1.1. Calculate the total cost for the 25-year period of using hire purchase if Brenda chooses to use 3 flow production. Indicative content 1 mark for the formula for calculating the hire purchase cost (words or figures) 1 mark for calculating the hire purchase cost per year / number of months over the 25-year period 1 mark for calculating the hire purchase cost over the 25-year period • Hire purchase cost = (cost per month  12 months)  25 years • Hire purchase cost over a 25-year period = $600  12 months = $7200 = $7200  25 years = $180 000 Answer = $180 000 (3) 1(b)(i) Marks 3 marks Correct answer Working and units do not matter. $180 000 allow 180 000 Must be three to denote the three marks. 2 marks One of the following: To award two marks, there must be • Correct formula for the hire purchase cost over a • Two and a 25-year period (figures or words) OR AND ONE OF • One , one and one • Correct calculation of the hire purchase cost per year ($7200) OR • Correct calculation of the number of months over the 25-year period (12  25 = 300 months) • Incorrect answer with one mistake allowing OFR for the final stage, e.g. 180 1 mark One of the following: To award one mark, there must be: • Correct formula for the hire purchase cost over a • One and two 25-year period (figures or words) OR • Correct calculation of the hire purchase cost per year ($7200) OR • Correct calculation of the number of months over the 25-year period (12  25 = 300 months) 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one advantage for BB of using hire purchase as a source of finance. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding • fixed monthly repayments • own the product after the final payment is made (unlike leasing) • can budget as know the fixed monthly repayment • business does not have to make a large initial cash payment • long timescale to finance the asset AO2 Application • APP can be awarded for a further development of the AO1 point Use of context/data related to HP as a source of finance for BB: Machinery ($) $100 000 capital cost – mass production $500 per month over a 20-year period $150 000 capital cost – batch production $600 per month on a 25-year period 1(b)(ii) • used all savings • featured in a government promotion • dynamic business environment • new business Application for the second APP mark must be made to BB and cannot be generic No reward for reference to interest payments leading to BB paying more than the purchase cost of the asset as it is a disadvantage. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of an advantage of the use of hire purchase 1 mark Explanation Explanation of an advantage of the use of hire purchase 1 mark Context Applied to a business context/business environment 1 mark 1(c) Analyse two limitations for BB of creating a business plan. 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 identifies the question. context. connections between causes, impacts • Knowledge of one relevant • Application of one relevant and/or consequences of two points. point is used to answer the point to a business context. • Limited analysis that identifies question. 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. 1(c) Indicative content AO1 Knowledge and understanding Knowledge of limitations to BB of creating a business plan (max 2 marks – annotate first limitation on left and second limitation on right) including: • requires skill to produce a business plan • require experience to produce a business plan • waste/use of resources to create business plan, e.g. time, financial • opportunity cost of producing a business plan • could create a false sense of certainty • based on estimates/predictions • may lead entrepreneurs to be inflexible/reduce creativity – new opportunities may arise that are not in the plan, and could be overlooked/rejected • cannot account for changes in the external environment Do not reward vague answers, e.g. poorly written or inaccurate data. AO2 Application Context applied to a limitation of BB creating a business plan (max 2 marks), including: • BB is a newly established enterprise • Brenda is inexperienced • no sales data • social enterprise • dynamic business environment • many businesses have recently failed • recycle low-cost waste to help the poorest in society • any financial data from Table 1.1 • CC is keen to invest to improve its own corporate social image 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. Limitations may include: • requires skill, experience and understanding to produce a business plan which Brenda does not have may make errors with the market research/predictions – may lead to CC not investing in the project • waste/use of resources to create business plan, e.g. time, financial; which could be used on other tasks in the business – leading to reduced profits/revenue • could create a false sense of certainty; leading to poor decisions – business failure • based on estimates/predictions which may be inaccurate; leads to a shortfall in funds – banks may not be willing to increase investment • inflexibility; BB may miss out on new opportunities – limit growth potential/profitability Accept all valid responses. 1(d) Evaluate whether BB should use flow production to produce bricks. 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. 1(d) Indicative content AO1 Knowledge and understanding Knowledge of the features of flow production (max 2 marks), including: • continuous production/24–7 • mass production • higher productivity • suited to identical/standardised products (no changes/undifferentiated)/lack of flexibility • automation • high purchase cost • use of machinery/technology • machines need to be maintained • large quantities of output AO2 Application Context applied to features of flow production (max 2 marks), including: • BB is a newly established enterprise • no sales data • social enterprise • dynamic business environment • many businesses have recently failed • recycle low-cost waste • any financial data from Table 1.1 • CC is keen to invest to improve its own corporate social image • BB’s target market are the poorest in society/citizens on low incomes • mass production produces one standard brick/batch production creates a variety of sizes of bricks according to customer preferences • one size of brick used in 80% of house construction 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. • higher productivity; increased efficiency – increase profitability • mass production; higher market share – increased revenue and profits for future growth • the standard brick is used in 80% of house construction – potential for a large share of the market – market leadership • higher productivity; economies of scale/reduced unit cost of production – can lower prices for customers • higher purchase cost; larger source of finance needed to purchase outright – increased cost of borrowing/less funds available for future expansion • higher purchase cost per month; higher monthly expenses – increased cash outflow • cannot change the design of the brick; reduced customer satisfaction – reduced market share as customers move to competitors with more choice 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 BB should use flow production to produce bricks • what the judgement might depend upon; the amount of investment and level of risk CC is prepared to accept for a new social enterprise, the likely requirements of the target market, the ability and skill of the end users and the lifespan of the machinery. • weighing up of the arguments for flow production on the success of the social enterprise Accept all valid responses. 1(d) Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence with supporting evidence) context) evidence) BB should use flow BB should use flow production because a BB should use flow production because 100 bricks production. higher number of bricks can be produced can be produced per hour which is 60 more per per hour. hour than batch production. No, batch production No, batch production is better than flow No, batch production is better than flow production is better than flow production because a variety of brick because a variety of brick sizes can be made production. sizes can be made leading to greater leading to greater customer satisfaction. 20% of customer satisfaction. house construction do not use the standard brick size so these customers’ needs would otherwise be unmet. Flow production Flow production should be used by BB Flow production should be used by BB as the should be used by BB. as the higher productivity will enable the higher productivity will enable the business to business to generate more revenue. generate more revenue, which can be used to cover the $600 hire purchase cost per month.

Question 13

Frank’s Fruits (FF) Frank grows fruit, including oranges, on his farm in country J. He sells his fruit at a market in a local city one day …

Accepted Answer

Question Answer Marks 1(a)(i) Identify one method of measuring the size of a business. 1 Indicative content Identification of a method may include: • Capital employed • Market capitalisation • Market share • Revenue (allow sales, sales turnover or turnover) • Quantity sold • Value of output • Number of employees • Area/space • Number of outlets • Number of customers Do not allow profit – which is a measure of success or performance, but not size. If more than one answer is given, only mark the first, reading from top left to bottom right. Accept all valid responses. 1(a)(ii) Explain the term primary sector. 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 primary sector will include (max 1 mark): • Natural resources / raw materials OR • An example of the processes involved in the primary sector, such as extraction/agriculture/farming/growing/fishing/mining etc. AO2 Application Explanation of primary sector will include (max 1 mark): • Natural resources / raw materials AND • An example of the processes involved in the primary sector, such as extraction/agriculture/farming/growing/fishing/mining etc. 1(a)(ii) Context applied to primary sector , including (max 1 mark): • Any example of primary sector, including: – A valid example of a primary sector business (do not allow FF as an example, unless it is clear that it is focussed on the farming element of the business (because it is in the primary and tertiary sectors). – A valid example of a primary sector product, such as ‘fruit’, ‘oil’ or ‘metal’ etc. Accept all valid responses Exemplar and annotations Mark Rationale Businesses in the primary sector are involved in natural resources 3 An answer which starts with the knowledge . For example, Frank farms oranges . and then has an example of the process and the product. Businesses that extract raw materials . For example, 3 growing oranges . A business could mine coal , which has been dug up from 2 the ground. Getting things from nature , such as farming . 2 Clear knowledge. Some application. The extraction of raw materials. 2 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. It is about producing goods. 0 No knowledge of the primary sector. Too vague. 1(b)(i) Refer to Table. 1.1. Calculate the number of oranges that Frank needs to sell to break even in July 2025. 3 Indicative content Formula to find the break-even quantity Fixed costs • (price per unit – variable cost per unit) (1) OR Fixed costs ALT 1 • Contribution (1) 0.80  5650 = 4520 (total revenue) 4520 – 2825 (TVC) Variable cost per unit = $2825 / 5650 = 1695 (total contribution) (1) = $0.50 (1) 1695 / 5650 Contribution per unit = $0.80 – $0.50 = 0.30 (contribution per unit) (1) = $0.30 (1) 1350 / 0.3 Final answer = 1350 / ($0.30) = 4500 (1) = 4500 (1) 4500 oranges or 4500 (3) 4500 oranges or 4500 (3) OFR applies for final answer and contribution per unit 1(b)(i) Exemplar and annotations Marks 3 marks Correct answer Working and oranges/units/percentage sign do 4500 oranges or 4500 not matter. 2 marks BOTH of the following: To award two marks, there must be • Correct formula • Two and a • Correct calculation of variable cost per unit OR ($0.50) • One , one and one OR OR • Two and a Correct calculation of contribution per unit ($0.30) 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 variable cost per unit 0 marks No creditable content. To award zero marks, there must be a minimum of one 1(b)(ii) Explain one limitation for Frank of using break-even analysis. 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 limitation of break-even analysis : • Fixed costs may not be constant • Assumption that output equals sales. • Assumption that unit variable costs remain constant. • Assumption that price will remain constant. • Only useful for individual (or limited number of) product lines. • Does not take into account external changes. • Only a forecast/estimate. • Difficult to allocate fixed costs. AO2 Application Explanation of a limitation of using break-even analysis (max 1 mark), including: • Fixed costs may not be constant – may change in long run • Assumption that output equals sales – but not all output may be sold • Assumption that unit variable costs remain constant – but may not be at all output levels • Assumption that price will remain constant – but may not be at all output levels 1(b)(ii) • Only useful for individual (or limited number of) product lines – must be done for each product • Does not take into account external changes – such as social, legal, economic, political, technological • Only a forecast/estimate – so may not be reliable. Context applied to FF (max 1 mark), including: • Frank is a sole trader • Frank grows the fruit sold on his farm • Frank sells the fruit from a market • Competitors are a national supermarket and fruit seller who sells from a shop • Freshness is Frank’s USP / fruit is a perishable product • Competitive pricing • Objective is to increase profit by 10% by the end of 2026 Accept all valid responses. Exemplar and annotations Mark Rationale A limitation is that it assumes that only one product is sold 3 A clear limitation that is explained because break-even analysis has to be done for each product . and has context . Frank sells oranges and lemons on his farm . Assumes the selling price stays the same which is not 2 A limitation identified . The context of appropriate for Frank as he uses competitive pricing . Frank’s pricing strategy is applied , but no explanation. Assumes no stock of oranges are kept so it is appropriate for 1 Knowledge of a factor. The rest of the answer is not answering the question, so Frank’s business to make more profit. (Not Answering Question). Break-even analysis does not tell Frank the amount of cash 0 No valid knowledge is shown, so no marks generated from selling oranges . can be awarded. 1(c) Analyse two benefits to Frank of operating as a sole trader. 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 used to answer the business context. between causes, impacts and/or consequences of question. • Application of one two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 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 marking. 1(c) Indicative content AO1 Knowledge and understanding Knowledge of the benefits of operating as a sole trader (max 2 s), may include: • Keep all profit made / no sharing of profit • Can make all business decisions without having to consult other owners / no consultation • Total control • Freedom to choose own work hours • Can employ staff • Relatively low start-up costs • Financial data is private • Easy to set up / less administration AO2 Application Max one for application in the first benefit and max one for application in the second benefit. Application of knowledge of benefit of operating as a sole trader to Frank/FF (max 2 s), including • Frank grows the fruit sold on his farm • Frank sells the fruit from a market • Frank used all of his redundancy money from his job with large company to set up the business • Competitors are a national supermarket and fruit seller who sells from a shop • Freshness is Frank’s USP • Competitive pricing • Objective is to increase profit by 10% by the end of 2026 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. • Frank is able to make all decisions. No time is wasted consulted with other owners which enables the decisions to be implemented quicker/before competitors and therefore generate more profit. • The sole trader can keep a larger amount of profit as it doesn’t have to be shared with other owners. • The costs of setting up a sole trader are typically less than other forms of ownership so less capital will be needed to start the business. • The owner can choose their own working hours and so enjoy a better work-life balance. This can help the sole trader make better business decisions and increase its market share. 1(c) As a sole trader, there is no separate legal identity for FF. Therefore, any financial impact on the business, is also an impact on Frank and can be awarded as analysis and developed analysis. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Frank can keep all of the profit made and it was his own redundancy money Which increases Franks income as a sole trader , that he used to set up FF . and could lead to a better lifestyle for him . It is easier and cheaper to set up as a Which is likely to help Frank meet his This is because he will have lower sole trader , 25% profitability target by 2026 . setup costs and therefore increase the profit made from selling his fruit . 1(d) Evaluate whether Frank should introduce price skimming. 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) Indicative content AO1 Knowledge and understanding Knowledge of price skimming (max 2 s), including: • Price skimming is where a product is priced at a higher price than competitors • Maximises the selling price • May create a luxurious/exclusive product image • Often used for a new product to the market or where a producer has a strong USP (so a high price can be charged) • Price may need to be reduced as the market becomes more competitive • Low price elasticity of demand (inelastic PED, so high price can be charged) AO2 Application Limited application applies knowledge of cost information to OFD once. Developed application + applies knowledge of cost information to OFD twice. • Frank is a sole trader • Frank grows the fruit sold on his farm • Frank sells the fruit from a market • Frank used all of his redundancy money from his job with large company to set up the business • Competitors are a national supermarket and fruit seller who sells from a shop • Freshness is Frank’s USP • Competitive pricing • Objective is to increase profit by 10% by the end of 2026 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 skimming means that a higher price will be charged for the oranges. Assuming that the costs remain the same, Frank will make a higher profit per orange sold. • Frank has a USP for freshness which gives his products an advantage over competitors. This quality may mean that demand for the product will be retained at current levels despite the increase in price. Customers may be less sensitive to increases in price. • Increase in price may mean that demand reduces by a larger proportion so Frank’s profitability will reduce. • Competitive pricing means that Frank’s products will not have an advantage/disadvantage compared to the prices charged by competitors. Currently uses competitive pricing so demand will remain the same. 1(d) • Frank sells his products from a market so overheads likely to be lower than those of the supermarket and shop so Frank’s profitability is likely to be higher than his main competitors. 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. • The impact on profitability depends on the price elasticity of demand. • Frank has a USP for freshness which gives his products an advantage over competitors. This quality may mean that demand for the product will be retained at current levels despite the increase in price. Customers may be less sensitive to increases in price. • Impact of other external factors • A judgement that other factors are more important than price alone. Accept all valid responses. Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) He should introduce price skimming. He should introduce price skimming He should introduce price skimming because this will allow him to have a because this will allow him to have a much higher level of profitability for his much higher level of profitability for his products. products and meet his objective of increasing profit by 10% It depends upon the reaction of It depends upon the reaction of It depends upon the reaction of Frank’s customers to the price Frank’s customers to the price Frank’s customers to the price skimming. skimming. If customers are price skimming. If customers are price elastic, then he should not introduce elastic, then he should not introduce it it. because customers will simply choose to shop at the national supermarket.

Question 14

Premium Homes (PH) PH owns student rental accommodation in all the major cities in country Y. PH used demographic segmentation in its marke…

Accepted Answer

2(a)(i) Identify one way in which business size can be measured. 1 Indicative content Identification of a method may include: • Capital employed • Market capitalisation • Market share • Revenue (allow sales, sales turnover or turnover, income) • Quantity sold • Value of output • Number of employees • Area/space • Number of outlets • Number of customers Do not allow profit – which is a measure of success or performance, but not size. If more than one answer is given, only mark the first, reading from top left to bottom right. Accept all valid responses. 2(a)(ii) Explain the term demographic segmentation. 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 demographic segmentation may include: • The identification of groups of customers with similar or common needs or characteristics within a market • Dividing the market according to factors that describe the population • Specific customer groups / target markets AO2 Application Explanation of demographic segmentation (max 1 mark) including: • Study of population data/trends • Examples of demographic factors, e.g. age, gender, race, social class, income Context applied to demographic segmentation , including (max 1 mark): • A valid example of a business that uses demographic segmentation to plan how it markets its products, e.g. a luxury car manufacturer may use demographic segmentation to target its advertising at high-income individuals or PH targets its student rental accommodation at university students 2(a)(ii) • Used for marketing of different products or services to specific consumer groups • Helps the business to adapt the marketing mix to the needs of the target customer group • Different marketing decisions for different groups Accept all valid responses Application can be made to PH or any other scenario/context/business/person. Exemplar and annotations Mark Rationale Dividing the market into groups according to age 3 The answer starts with application but shows or gender , for example a clothes retailer has knowledge by the reference to age/gender. There is three departments with products for men, women an example of the use of demographic segmentation and children . by a clothes retailer. Identifying groups of customers with similar needs or 2 Clear knowledge. With some application of how characteristics within a market using population data such as age Used for marketing of different products or services 1 A reasonable definition to specific types of customer Segmenting using demographics 0 Tautological 2(b)(i) Refer to lines 6–8. Calculate PH’s labour turnover in 2024. 3 Formula to calculate labour turnover: number of employees leaving in 1 year •  100 (1 mark – formula only) Average number of people employed Use of figures: 45 •  100 (1 mark – use of correct figures) 150 Labour turnover: • 30% (1 mark – correct answer – no % necessary) Exemplar and annotations Marks Answer Rationale 3 marks Correct answer Working and % do not matter. 30% Must be three to denote the three marks. Correct rounding must be applied. 2 marks Both of the following: To award two marks, there must be • Correct formula • Two and a • Correct identification of figures OR • One , one and one OR An incorrect answer with one mistake allowing OFR for final stage. OR 0.3 (has not completed final stage to multiply by 100) OR A correct answer from an inverted formula (3.3 – OFR) 2(b)(i) Marks Answer Rationale 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two 0 marks No creditable content. To award zero marks, there must be • One 2(b)(ii) Explain one way in which PH could use Maslow’s Hierarchy of Needs 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 use of a motivational theory (max 1 mark), including: • Change the way that employees are treated/managed/motivated at PH or relevant examples • Make changes to increase motivation to maintain PH’s low labour turnover/retain employees • Understand employee behaviour/employee motivation • Measuring employee needs AO2 Application Explanation of a use of Maslow’s hierarchy of needs (max 1 mark), including: • Explain how motivation affects how employees behave, e.g. an employee doing a repetitive job/working alone may have a high absenteeism rate • Explain the use with reference to one of Maslow’s categories of need, e.g. physiological, safety, love and belonging, esteem and self-actualisation needs • Examples of how PH could change the way that employees are managed/motivated: • Offer more opportunities for internal promotion • Increase employee salaries • Encourage employees to stay in the business • Change working conditions 2(b)(ii) Context applied to PH (max 1 mark), including: • Use of demographic segmentation in its market research • University students would pay a premium price for high specification rental accommodation • Specialist teams focused on sales, maintenance, customer service and finance. • Little opportunity for internal promotion • Low salaries • Offers profit sharing • 150 employees • Low labour turnover • Profit reduced by 75% • In 2024, 45 employees left PH • Increased complaints about maintenance and customer service • Use of data from Fig. 2.1 • Operations Director wants to improve the sustainability of PH’s operations Accept all valid responses. Exemplar and annotations Mark Rationale Managers can understand what motivates 3 Use of Maslow’s hierarchy of needs by managers employees such as ensuring physiological needs , with further explanation with reference to Maslow’s are met for the 150 employees . hierarchy . The third mark is for reference to the context . Helps managers decide how to change their 2 Knowledge of a use and applied to the number of management style so that less than 45 employees. employees leave this year . Identifies the different motivations for human 1 Knowledge of a use with no application behaviour Maslow’s Hierarchy of needs is a motivational theory 0 No use of Maslow’s hierarchy of needs. This answer is the study of understanding what drives a person to is a definition of the theory and does not answer the question work towards a particular goal or outcome . 2(c) Analyse one advantage and one disadvantage to PH of using an overdraft as a source of finance. 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. Advantage in the left hand side column, disadvantage in the right hand side column 2(c) Indicative content AO1 Knowledge and understanding Knowledge of one advantage using an overdraft as a source of finance (max 1 mark), including: • Quick – previously agreed / immediately available • Convenient – can use it as required • Flexible • No repayment schedule • No loss of ownership Knowledge of one disadvantage using an overdraft as a source of finance (max 1 mark), including: • High interest rates / fees • Can be recalled at any time • Often low limit available • Can only be used for short-term needs • Must be repaid Note: the advantages/disadvantages have to be true for an overdraft, but not exclusively true to an overdraft (i.e. they may apply to other sources of finance). AO2 Application Application of an advantage or disadvantage to PH , including: • Use of demographic segmentation in its market research • University students would pay a premium price for high specification rental accommodation • Specialist teams focused on sales, maintenance, customer service and finance. • Little opportunity for internal promotion • Low salaries • Offers profit sharing • 150 employees • Low labour turnover • Profit reduced by 75% • In 2024, 45 employees left PH • Increased complaints about maintenance and customer service • Use of data from Fig. 2.1 2(c) • Operations Director wants to improve the sustainability of PH’s operations • Use of data from Fig. 2.1 • Operations Director wants to improve the sustainability of PH’s operations AO3 Analysis Limited analysis of an advantage/disadvantage of using an overdraft – candidate shows one link in the chain of analysis. Developed analysis of an advantage/disadvantage of using an overdraft candidate shows two or more links in the chain of analysis or a two-sided analysis. Analysis may include: • Quick – previously agreed / immediately available; the funds can be used for expansion immediately – leading to increased market share • Convenient – can use it as required; no time is wasted with application – can be used for other activities such as marketing • Flexible; can be used for any type of purchase – to meet the business objectives • No repayment schedule; this will reduce cash outflows – This money can be used to better maintain the properties rented, reducing customer complaints. • High interest rates/fees; higher interest rates may increase costs – this will reduce profits • Can be recalled at any time; the business may need to suddenly repay the money leading to cashflow problems – threatening business survival • Often low limit available; The overdraft limit may be low. This will limit the investments that PH can make – therefore the business will not be able to reduce complaints. • Can only be used for short-term needs; limiting the project that the money can be used for – some objectives may not be met • Must be repaid; increasing cash outflows – less funds available for marketing Accept all valid responses. 2(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar of an advantage Interest only charged on the For upgrading Ensures short term cost is Annotations for the overdrawn amount accommodation in high- minimal reducing further advantage should be income cities . pressure on profit levels . placed in the left-hand margin. Exemplar of a disadvantage The funds need to be repaid If student accommodation This could lead to a bad Annotations for the not rented out . credit rating if payments disadvantage should be missed which may placed in the right-hand increase cost of future margin. borrowing . 2(d) Evaluate whether Frank’s plan will improve the sustainability of PH’s operations 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 • A developed and/or factor(s) is used to business context. connections between judgement/conclusion answer the question. causes, impacts and/or is made. consequences. • Developed evaluative comments which balance some key arguments. 2(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 • A and/or factor(s) is used to business context. connections between judgement/conclusio answer the question. causes, impacts and/or n is made with limited consequences. 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 sustainability of operations (max 1 ), including: • Operating / surviving / remaining in business for the long-term / future / not running out of money / continuity / stable • Efficiency • Productive • Day-to-day running of the business • Keeping customers satisfied • Maintaining profitability – reducing expenses and increasing revenue Note: The question stem asks about operational sustainability. Therefore, operational sustainability must be the focus of the answer, not environmental sustainability. 2(d) AO2 Application Application of an advantage or disadvantage to PB , including: • Use of demographic segmentation in its market research • University students would pay a premium price for high specification rental accommodation • Specialist teams focused on sales, maintenance, customer service and finance. • Little opportunity for internal promotion • Low salaries • Offers profit sharing • 150 employees • Low labour turnover • Profit reduced by 75% • In 2024, 45 employees left PH • Increased complaints about maintenance and customer service • Use of data from Fig. 2.1 AO3 Analysis Limited analysis of whether the plan will improve the sustainability of PH’s operations – candidate shows one link in the chain of analysis. Developed analysis of whether the plan will improve the sustainability of PH’s operations – candidate shows two or more links in the chain of analysis. • Financial stability; reduce short term cash inflow – reduce debt burden and interest payments • Focus on profit; increase profit margins – focus on core values • Increased efficiency of workforce; may lose excellent employees who take knowledge to competitors – lose market share/customer service may reduce further due to losing more experienced employees • Keeping customers satisfied; increased market share – more market power / ability to increase prices • Business continues for the long-term; increased employee satisfaction from greater job security – reduced labour turnover 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 . 2(d) • The impact of the plan depends on the timescales, future aims and objectives and financial liquidity of PH. After downsizing the amount of revenue generated may not meet shareholder expectations • Will demand for premium accommodation increase in the future? What are the demands of students? • Should PH repurpose its accommodation for a different target audience, create a subsidiary brand and grow market share? • Is market share and size the most important measure of success, or is profitability more important? • The extension strategy may generate a short-term boost to sales/market share, but will it be sustained in the long- term? • A judgement on whether the course of action is suitable for PH. Accept all valid responses. Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) Frank’s plan will improve the Frank’s plan will improve the Frank’s plan will improve the sustainability of PH’s operations. sustainability of PH’s operations. sustainability of PH’s operations. Increased labour efficiency will reduce Increased labour efficiency will reduce expenditure on salaries. expenditure on salaries. This will help to reverse the trend of reducing profit levels over the past two years. I don’t think the sustainability of PH’s I don’t think the sustainability of PH’s I don’t think the sustainability of PH’s operations will be improved. operations will be improved. Investing operations will be improved. Investing in new accommodation will cost a lot in new accommodation will cost a lot of money. of money, and PH does not have experienced employees to do the work as they have left.

Question	Answer	Marks	From
1	see sheet	30	9609/21 May/June 2017
2	see sheet	30	9609/22 May/June 2017
3	see sheet	30	9609/23 Oct/Nov 2017
4	see sheet	30	9609/22 Oct/Nov 2018
5	see sheet	30	9609/23 Oct/Nov 2018
6	see sheet	30	9609/22 Oct/Nov 2019
7	see sheet	30	9609/22 May/June 2021
8	see sheet	30	9609/21 Oct/Nov 2021
9	see sheet	30	9609/23 May/June 2022
10	see sheet	30	9609/21 Oct/Nov 2022
11	see sheet	30	9609/22 Oct/Nov 2023
12	see sheet	30	9609/23 Oct/Nov 2024
13	see sheet	30	9609/22 Feb/March 2025
14	see sheet	30	9609/21 May/June 2025

Size of business — Paper 2 · A Level Business (for first examination in 2016) 9609

Questions15 pages

Mark scheme14 answers

Another paper, or another topic

Questions as text

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