Business Studies 0450/13 May/June 2024: question paper and mark scheme

Mark scheme

1(a) Identify one non-current asset and one non-current 2 Only award first response for each type of asset/liability. liability. Award one mark for each non-current asset/non-current liability (max 1 for each). Points might include: Non-current assets: Land/buildings Equipment Machinery Vehicles Fixtures and/or fittings Non-current liabilities: Bank loans Other appropriate responses should be credited. 1(b) Calculate WFT’s current ratio in 2024. Show your 2 Award only 1 mark if 0.8 is written as part of the answer but working. is not given as the final answer. Award 2 marks for correct answer. Award 1 mark for correct method but incorrect answer. Correct answer: 0.8:1 [2] 0.8 [2] Correct method e.g. 120 000 /150 000 [1] current assets / current liabilities [1] If correct answer given with no working shown award two marks. 1(c) Outline two ways legal controls over business activity 4 To use words from the stem as application, the reference affecting the environment might affect WFT. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant way (max 2). Award 1 mark for each relevant reference to this business The following words are likely to be appropriate for this (max 2). question: Primary sector Points might include: (Harvests) wood/trees/timber May have to change where/how dispose of waste [k] 30 employees from harvesting trees [app] (Uses a lot of) technology Might have to pay fines/buy pollution permits [k] for this Increase added value primary sector business [app] $320 000 (non-current liabilities) Might limit use of energy [k] which may matter as the business uses a lot of technology [app] Other appropriate examples can be credited. May have to move/change location/restrict what can do in a certain area [k] affecting its 30 employees [app] May have to limit/reduce amount/output [k] May have to change equipment/how operate [k] May have to retrain/provide more training its employees [k] Increase costs [k] May have to replant/reforest/return land to its former state [k] Other appropriate responses should be credited. 1(d) Explain two factors WFT should consider when deciding 6 To use words from the stem as application, the reference on a source of finance. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant factor (max 2). The following words are likely to be appropriate for this Award 1 mark for each relevant reference to this business question: (max 2). Primary sector Award 1 mark for each relevant explanation (max 2). (Harvests) wood/trees/timber 30 employees Points might include: (Uses a lot of) technology Amount [k] as uses a lot of technology [app] it may need Increase added value a large amount which may not be available from internal $600 000 (non-current assets) sources [an] $120 000 (current assets) Level of existing loans/debts/borrowing [k] as has non- $150 000 (current liabilities) current liabilities of $320 000 [app] so bank may not be $320 000 (non-current liabilities) willing to lend [an] Size/legal form of business [k] as if this primary sector Other appropriate examples can be credited. business [app] and is a limited company, it would be able to issue shares [an] Interest/cost of finance [k] as high interest would increase cash outflows [an] Purpose/why it is needed [k] Length of time required for [k] Credit history [k] Other appropriate responses should be credited. 1(e) Explain two ways a business might increase added 6 This is a general question so there are no marks for value. Which do you think is the best way? Justify your application. answer. Some points of analysis could apply to more than one way but Award up to 2 marks for identification of relevant points. only award once. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which is the best way for a business to increase added value. Points might include: Use cheaper materials/supplier [k] will help lower (input) costs [an] Increase price [k] as this would widen the gap between (input) cost and price [an] Improve the packaging [k] so customers perceive the product to be worth more [an] so may be prepared to pay extra [an] Excellent customer service [k] so customers may be prepared to pay a higher price [an] Branding/improve brand image/marketing [k] Additional product features [k] Convenience [k] Other appropriate responses should also be credited. Justification might include: One way is to use cheaper materials [k] as this will help lower input costs [an]. The business could increase the price [k] as this would widen the gap between input cost and price [an]. Setting a higher price is better because customers may still be willing to pay more to maintain good quality [eval] whereas using cheaper materials is more likely to lower quality and lower sales [eval].

Mark scheme

2(a) Define ‘profit’ 2 For 2 marks must have the idea of revenue and total/all costs. Award 2 marks for a full definition. Award 1 mark for a partial definition. Difference between revenue and total costs [2] OR The financial gain of a business once all the costs have been paid using revenue [2] Partial definition e.g. revenue minus costs [1] 2(b) Identify two reasons why consumer spending patterns 2 Only award the first two responses given. might change. Award 1 mark per reason (max 2). Points might include: Technology Consumer tastes/fashions/trends Income Age (profile of population) Price of own product Price of competitor's products Advertising/promotional activities Other appropriate responses should be credited. 2(c) Outline two methods of primary market research Alana 4 To use words from the stem as application, the reference might use. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant method (max 2). Award 1 mark for each relevant reference to this business The following words are likely to be appropriate for this (max 2). question: Restaurant such as menus, cooking Points might include: Plant/vegetable-based meals or related words such as Focus groups [k] from her customers over the past 5 food, cooking years [app] City centre Observations [k] by her 16 employees [app] 16 employees Interviews [k] by asking people in the city centre [app] Market segment/segmentation Surveys [k] about the restaurant [app] 5 years ago Questionnaires [k] about her plant-based meals [app] Consumer spending patterns $80 000 (profit) Other appropriate responses should be credited. Other appropriate examples can be credited. 2(d) Explain two possible effects of an increase in interest 6 To use words from the stem as application, the reference rates on Alana’s business. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant effect (max 2). The following words are likely to be appropriate for this Award 1 mark for each relevant reference to this business question: (max 2). Restaurant such as menus cooking Award 1 mark for each relevant explanation (max 2). Plant/vegetable-based meals or related words such as food, Points might include: City centre Cost of borrowing increases [k] for the restaurant [app] 16 employees so less likely to invest/expand / increase prices [an] Market segment/segmentation Less demand/customers/sales [k] so lower revenue [an] 5 years ago because of changes in consumer spending patterns [app] Consumer spending patterns May be more difficult to obtain loans/borrow [k] so may $80 000 (profit) have to rely on other sources of finance [an] such as her $80 000 profit [app] Other appropriate examples can be credited. May delay/reduce level of investment/expansion [k] Other appropriate responses should be credited. Some points could be awarded as [k] or [an] but do not award the same point twice. 2(e) Do you think income is the best way for a business to 6 This is a general question so there are no marks for segment a market? Justify your answer. application. Award up to 2 marks for identification of relevant points. Some points may be relevant for more than one way, but Award up to 2 marks for relevant development of points. only award point once. Award up to 2 marks for a justified decision as to whether income is the best way for a business to segment a market. Alternative methods of classification are: Demographic (age, socio-economic, gender, income, Points might include: ethnic background, family size) Income: Geographic (location/region) Can target advertising at particular groups [k] so more Psychographic (lifestyle, attitudes, personalities) cost-effective (use of budget) / reducing expenses [an] Can target groups with different products [k] which may There can be a mix of classifications, but do not award lead to more sales/market share [an] overlapping points. Can price the product differently for each income groups [k] which could increase sales/revenue [an] Product could be associated as cheap/expensive [k] which reduces potential market [an] Not everyone will like the same things [k] By region/location [k] Able to adapt products/advertising to consider cultural/social differences [an] Can modify language to suit the area [an] Helps provide appropriate products that would sell in specific locations / some products may be demand more in certain areas than others [an] Gender [k] Allows business to change design to appeal to men/women [an] Could miss out on large potential market as feel the product is not designed for them [an] Expensive to make/stock products to target both genders [an] 2(e) Age [k] As different age groups may have different product preferences [an] Can target advertising at particular age groups [an] By use of product [k] By lifestyle [k] Other appropriate responses should also be credited. Justification might include: Income allows a business to price the product differently for different income groups [k] so customers will pay based on what they can afford [an]. It could use gender [k] which allows the business to change design to appeal to men or women [an]. Income is likely to be a better way as using gender could lead to missing out on half of the potential market [eval]. Whereas, by using income, the business can price its products based on ability to pay which could lead to a wider potential market overall [eval].

Mark scheme

3(a) Define ‘public limited company’. 2 For 2 marks need the idea that sell shares and to whom sold to/by. Award 2 marks for a full definition. Award 1 mark for a partial definition. Businesses owned by shareholders, but it can sell shares to the public (and their shares are tradeable on the stock exchange) [2] OR A company that sells its shares to the general public (through a stock exchange) [2] Partial definition e.g. a business that can sell shares [1] 3(b) Identify two reasons for globalisation. 2 Only award the first two responses given. Award 1 mark per reason (max 2). Points might include: Increasing number of free trade agreements/reduction in trade barriers Improved/cheaper travel links Improved communication networks/technology Emerging markets are expanding quickly Change in government economic policy/allowing businesses from other countries to set up operations in own country Other appropriate responses should be credited. 3(c) Outline two economies of scale CQT might benefit from. 4 To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point Award 1 mark for each relevant economy of scale (max 2). being made. Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate for this question: Points might include: Paint Purchasing economies [k] when buying from local Flow production suppliers [app] 50 (employees/workers) Technical [k] especially as using flow production [app] Local suppliers Managerial [k] to help the business take advantage of Globalisation globalisation [app] Relocate its operations Marketing [k] to help increase sales of paint [app] Financial [k] which may help fund any relocation to other Other appropriate examples can be credited. countries [app] Other appropriate responses should also be credited. 3(d) Explain two limitations for CQT of using flow production. 6 To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point Award 1 mark for identification of each relevant limitation being made. (max 2). Award 1 mark for each relevant reference to this business The following words are likely to be appropriate for this (max 2). question: Award 1 mark for each relevant explanation (max 2). Paint Economies of scale Points might include: 50 (employees/workers) Inflexible/production line is difficult to change [k] so Local suppliers difficult to meet customer demand/needs [an] for paint Globalisation [app] Relocate its factory Demotivating [k] for its unskilled 50 employees [app] so Public limited company may lower efficiency/output [an] High level of raw materials/inventory is held [k] Other appropriate examples can be credited. increasing storage space/cost [an] for this public limited company [app] Some points can be [k] or [an] but only award once. If one machine breaks down the whole production line stops [k] which could lower output [an] so may not benefit from globalisation [app] High initial/set up cost [k] which the business may not be able to afford [an] Other appropriate responses should also be credited. 3(e) Explain two factors a business should consider when 6 This is a general question so there are no marks for deciding whether to relocate its factory to another application. country. Which factor is likely to be the most important? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which factor is likely to be the most important for a business to consider when deciding whether to relocate its factory to another country. Points might include: Access to/able to find (suitable) employees [k] increasing recruitment/training costs / so may need to pay higher wages [an] Access to/cost of suitable land/rent [k] as may need a big space/to lower fixed costs [an] Access/cost of raw materials / distance from suppliers/ need to find new suppliers [k] as if far away may increase transport costs [an] Different legal controls/standards [k] so may have to change how/where to operate [an] Communication/language problems [k] may lead to mistakes [an] Trade barriers e.g. quotas/tariffs [k] Access to government grants/incentives [k] Other appropriate responses should also be credited. 3(e) Justification might include: One factor is communication problems as people may speak different languages [k] which could lead to mistakes being made [an]. A second factor is different legal controls [k] so may have to change how/where to operate [an]. Legal controls are most important because a business can hire translators to overcome communication problems [eval] whereas a business has limited/no control over the laws of the country [eval].

Mark scheme

4(a) Identify two advantages to a business of having part- 2 Only award the first two responses given. time employees. Award 1 mark per advantage (max 2). Points might include: Cheaper than full-time/reduce labour costs/no need to pay when not working More flexible hours of work Can ask/more likely to work at busier times Can/more likely to extend working hours Provides a wider range of skills/experience Helps attract well-qualified employees who need flexible hours Helps retain experienced workers Other appropriate responses should be credited. 4(b) Define ‘organisational structure’. 2 One mark for idea of positions/levels/hierarchy in the organisation. Award 2 marks for a full definition. Award 1 mark for a partial definition. One mark is for understanding it refers to how it is managed/organised/responsibilities. Refers to the levels of management and division of responsibilities within an organisation [2] OR The formal, internal framework of a business that shows how it is managed and organised [2] Partial definition e.g. shows levels of management in a business [1] OR shows responsibilities of employees [1] 4(c) Identify four reasons why effective internal 4 Only award the first four responses given. communication is important for a business. Question requires candidates to identify the benefit of Award 1 mark per reason (max 4). communicating properly not why communicate. Points might include: Fewer mistakes/less waste/prevent mistakes Enable faster/better decision-making Improve motivation Improve coordination Improve efficiency/productivity Increase output Better collaboration between workers/manager/better teamwork Other appropriate responses should be credited. 4(d) Using Table 4.1, explain two reasons why MTO should 6 To use words from the stem as application, the reference select applicant A as its new manager. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant reason (max 2). The following words are likely to be appropriate for this Award 1 mark for each relevant reference to this business question: (max 2). Bank/financial services e.g. provide loans Award 1 mark for each relevant explanation (max 2). 1 million customers 2800 employees Points might include: 70 branches Knows what the job involves/experience [k] as has been 3 months experience (as a manager) a manager for 3 months [app] so less likely to make 18 months (at another business) mistakes/may need less training [an] (University) degree in Business Has (relevant) qualifications [k] as has got a degree in Good decision-making skills Business [app] so should be able to do the job [an] Growth (as objective) Good at decision-making [k] which can help the bank Narrow span of control [app] may help improve efficiency [an] Tall organisational structure May bring in new ideas [k] so may be able to help the business achieve its objective of growth [app] Other appropriate examples can be credited. Other appropriate responses should also be credited. 4(e) Explain two reasons why a business might want to 6 This is a general question so there are no marks for grow. Which reason is likely to be the most important? application. Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which reason (for growth) is likely to be the most important. Increase market share [k] so able to set/control prices [an] which may reduce competition [an] Benefit from economies of scale [k] leading to lower unit/average costs [an] which can increase its profit margin [an] Increase sales [k] which could lead to additional revenue [an] Spread risk [k] so that if no sales in one market, can still gain revenue from other markets [an] Increase profit [k] which can act as a source of finance/reinvest back into business [an] Increased status/reputation [k] could attract customers [an] Protect against risk of takeover [k] Survival [k] Other appropriate responses should also be credited. Justification might include: One reason is to increase sales [k] which could mean the business can increase revenue [an]. Another reason is to benefit from economies of scale [k] which will allow the business to achieve lower unit costs [an]. Economies of scale are likely to be the most important because lower unit costs will also increase the profit margin [eval] whereas the ability to increase sales may depend on the level of competition. [eval]