Business Studies 0450/12 May/June 2025: question paper and mark scheme

Mark scheme

1(a) Define ‘batch production’. 2 One mark for idea of a group/set of products. Award 2 marks for a full definition. Award 1 mark for a partial definition. • Where a quantity/group of one product is made, then a quantity of another product will be produced [2] • A whole batch/group moves through the different stages of production together [2] Partial definition e.g. • Similar items made together/items made in a group/set [1] • Moving together through different stages of production [1] 1(b) Identify two aims of promotion. 2 Only award the first two responses given. Award 1 mark for each aim (max 2). Points might include: • To raise awareness/inform/remind people about products/services • To persuade/attract (new) consumers / increase sales/revenue • To create/maintain brand/company image/reputation • Ensure/build customer loyalty/encourage repeat purchases • To introduce new products on to the market • To compete with competitors’ products/differentiate from competitors Other appropriate responses should be credited. 1(c) Outline one advantage and one disadvantage to NFC of 4 To use words from the stem as application, the reference using quality assurance. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant advantage/disadvantage (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). • Shoes • Batch (production) Points might include: • Promotion (of products) Advantages: • Developing new products • Errors can be spotted earlier/during production [k] of the • Product range shoes [app] • Market segmentation • Can motivate employees [k] so may be willing to offer ideas for its product range [app] Other appropriate examples can be credited. • No need to recruit quality inspectors [k] Disadvantages: • All (production) workers need training/time/cost to train workers [k] which may take funds away from developing new products [app] • Not all workers are interested/able to spot problems [k] during batch production [app] • May slow down production [k] Other appropriate responses should be credited. 1(d) Explain two benefits to NFC of using market 6 To use words from the stem as application, the reference segmentation. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant benefit (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). • Shoes Award 1 mark for each relevant explanation (max 2). • Batch production • Quality assurance Points might include: • Promotion (of products) • Can design/produce goods to meet specific needs of • Develop new products consumers/know what to produce [k] so that costs/materials are not wasted (producing wrong Other appropriate examples can be credited. product) [an] especially as plan to develop new products [app] Do not award answers about the benefits of market • Help target advertising/marketing strategies [k] to research. ensure maximum number of people see the products [an] which is an aim of promotion [app] • Identify gaps in the market/new opportunities [k] for its shoes [app] which can help spread risk [an] • May make marketing expenditure more effective [k] so do not waste money/resources [an] Other appropriate responses should be credited. 1(e) Do you think the benefits of developing new products 6 This is a general question so there are no marks for for a business are greater than the limitations? Justify application. your answer. To access evaluation must discuss at least one benefit and Award up to 2 marks for identification of relevant points. one limitation. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether For evaluation to be awarded justification will usually follow the benefits of developing new products for a business are on from relevant analysis of points. greater than the limitations. Points might include: Benefits: • Increase demand/customer (base)/sales [k] which may increase revenue/market share [an] • Can help spread risk/diversification [k] if sales fall for one product, this can be offset by sales of another product [an] • Provide competitive advantage/unique selling point (USP) [k] which could increase customer/brand loyalty [an] • Enter new markets [k] • Improve brand recognition/reputation [k] Limitations: • Must produce new/trial products/more raw materials [k] increases costs [an] • Need to carry out market research [k] increases cash outflows [an] • Need to launch/promote/market the new product [k] • Often requires large capital expenditure/cost of new machinery [k] • May need to recruit/train additional employees/specialists [k] Other appropriate responses should be credited. 1(e) Justification might include: New products can help increase potential sales [k] which increases revenue [an]. However, there is a cost of developing new products [k] which increases cash outflows [an]. The benefits of developing new products are greater because the extra revenue gained could cover the additional costs [eval] which can increase the chance of growth/long term survival [eval].

Mark scheme

2(a) Define ‘profit’. 2 Max 1 mark if refer to money rather than revenue/income. Award 2 marks for a full definition. Award 1 mark for a partial definition. • (Total) income of a business (revenue) less total cost [2] • (Total) revenue minus total costs [2] • Difference between revenue and total cost [2] • Gross profit – expenses [2] Partial definition e.g. • Revenue minus costs [1] Other appropriate responses should also be credited. 2(b) Identify two expenses a business might have. 2 Only award the first two responses given. Award 1 mark for each expense (max 2). Points might include: • Rent • Rates • Electricity/gas/heating/lighting/water/utilities • Insurance • Interest • Storage • Marketing/advertising • Salaries • Maintenance/repairs • Phone/internet Other appropriate responses should be credited. 2(c) Outline two possible reasons why FLD’s gross profit is 4 To use words from the stem as application, the reference decreasing. 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). • Furniture or related words e.g. chair • 460 (locations) Points might include: • Large business • Shop/retailers • Low/fall in amount of sales/demand/customers [k] at its • 20 000 employees 460 shops [app] • $400 million (revenue) • Change in price / increase/decrease (selling) price [k] • $200 million (gross profit) for the retailer [app] • Increase in cost of sales /variable cost / increase in cost Other appropriate examples can be credited. of inventory [k] so gross profit is at $200 million [app] Accept decreased revenue where no specific examples Other appropriate responses should be credited. given e.g. fall in number of sales/change in price. 2(d) Explain two advantages to FLD of using internal 6 To use words from the stem as application, the reference recruitment when recruiting new managers. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant advantage (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). • Furniture or related terms e.g. chair • 460 (locations) Points might include: • Large business • Cheaper/lower advertising costs (than external • Shop/retailers recruitment) [k] so lower/maintain expenses [an] of $60 • 20 000 employees million [app] • $60 million (expenses) • Already knows the business/how the business works [k] • $400 million (revenue) so can be productive sooner [an] to help sell furniture • $200 million (gross profit) [app] • Less/no (induction) training needed [k] Other appropriate examples can be credited. • Can motivate employees [k] at the 460 locations [app] reducing labour turnover/increase employee loyalty/increase sales [an] • The business knows the person/their ability/reliability/potential/can trust them [k] reducing chance of selecting the wrong person [an] • Recruitment is quicker [k] so able to focus on other business tasks [an] such as increasing its revenue above $400 million [app] Other appropriate responses should be credited. 2(e) Do you think job rotation is the best method for a large 6 This is a general question so there are no marks for business to use to motivate its employees? Justify your application. answer. To access knowledge candidates must name and not simply Award up to 2 marks for identification of relevant points. describe the method. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether For evaluation to be awarded justification will usually follow job rotation is the best method for a large business to use to on from relevant analysis of points. motivate its employees. Points might include: Job rotation: • More flexible/gain new skills [k] leading to higher productivity [an] • Can cover/replace others when someone is absent [k] so may be able to meet an order on time [an] • Makes the work more interesting/less boring for employees [k] so lower absenteeism/labour turnover/increase productivity [an] • Increased training needed [k] increasing costs/expenses [an] • Workers may not be willing/able to do different tasks [k] lowering quality/increasing waste/leading to mistakes [an] • Takes time to switch to/learn different tasks [k] Other methods might include: • Job enrichment [k] adding more responsibilities/challenging work/making workers feel more valued/recognised/trusted [an] • Bonus [k] only pay out if target reached [an] • Praise [k] involves no additional cost [an] • Training [k] which provides new skills [an] • Promotion (opportunities) [k] Other appropriate responses should be credited. 2(e) Justification might include: One advantage is the work is less boring for employees [k] which can lower absenteeism [an]. Another method is increasing wages [k] but this will increase expenses [an]. Job rotation is best for a large business because lower absenteeism would reduce costs of bringing in additional employees [eval] which could offset the higher labour costs for a large business which is likely to have many employees [eval].

Mark scheme

3(a) Define ‘private sector’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. • (When business activities are) owned by individuals [2] • (The part of the economy that is) controlled by individuals and companies for profit [2] Partial definition e.g. • Not government/state controlled [1] • Run/controlled by individuals [1] 3(b) Identify two reasons why new businesses are at a 2 Only award the first two responses given. greater risk of failure. Award 1 mark for each reason (max 2). Points might include: • Lack of finance/(start-up) capital • Cash flow problems/lack of liquidity • Level of competition/market already saturated • Lack/low level of customers/demand/sales/lack of customer loyalty • Poor planning/no business plan/lack of objectives • Lack of (managerial/business) experience/skills • Inadequate/no market research/poor marketing • No/low reputation/brand awareness/brand image Other appropriate responses should be credited. 3(c) Identify four stakeholder groups a business might have. 4 Only award the first four responses given. Award 1 mark for each stakeholder group (max 4). Points might include: • Employees/workers • Managers/directors • Owners/shareholders • Suppliers • Lenders/banks • Government • Local community • Customers Other appropriate responses should be credited. 3(d) Explain two characteristics Hal will need to become a 6 To use words from the stem as application, the reference successful entrepreneur. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant characteristic (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). • Leave his job Award 1 mark for each relevant explanation (max 2). • Start-up/new business • Bakery or examples e.g. cakes, recipes Points might include: • Private sector • Risk-taking [k] especially as plans to leave his job [app] • Stakeholder (groups) because the owner may lose their investment [an] • Hard-working [k] as must be ready to do everything on Other appropriate examples can be credited. own/as may have to work long hours [an] to set up his bakery [app] To access knowledge must identify a recognised • Creative [k] as having (new) ideas can help gain characteristic. customers [an] for his private sector business [app] • Effective communicator/persuasive [k] with his stakeholders [app] as may need to convince its banks/suppliers/customers to lend/provide/buy goods [an] • Perseverance/determination/resilience/self-motivated [k] so needs to be prepared to keep going when faced with problems [an] • Optimistic [k] so always think they will/can succeed [an] • (Self-) confident [k] so convince people/banks to invest [an] • Independent [k] as be able to work without any help [an] • Innovative [k] Other appropriate responses should be credited. 3(e) Do you think a bank loan is the best source of start-up 6 This is a general question so there are no marks for capital for a new business? Justify your answer. application. Award up to 2 marks for identification of relevant points. Some points analysis can be advantages and/or Award up to 2 marks for relevant development of points. disadvantages for different sources but only award the same Award up to 2 marks for a justified decision as to whether a point once. bank loan is the best source of start-up capital for a new business. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Points might include: Bank loan • Quick to arrange [k] so does not delay plans/so can pay bills on time [an] • Must pay interest [k] increasing costs/expenses/cash outflows [an] • Must repay [k] • Able to obtain large/full amount [k] • May need security/collateral [k] which may not be available for a start-up / so personal assets may be at risk [an] Other methods could include: • Own savings [k] as no need to repay [an] • Borrow from friends/family [k] as may give long time to repay [an] • Overdraft [k] can arrange quickly/only pay interest when used [an] • Government grant [k] which has no interest [an] • Crowdfunding [k] but no guarantee can raise full amount [an] Other appropriate responses should be credited. 3(e) Justification might include: One advantage of a bank loan is it is quick to arrange [k] so does not delay plans/ability to pay bills straightaway [an]. Another source is own savings [k] because there is no need to repay [an]. A bank loan is the best source because speed means they do not miss out on the opportunity whereas it can take time to build up enough savings [eval], and by the time they do, there may be insufficient demand [eval].

Mark scheme

4(a) Define ‘average cost’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. • Total cost divided by (total) output [2] • Total cost divided by the number of items produced/made [2] • The cost of producing a single product/unit of output [2] Partial definition e.g. • Cost divided by output [1] • Total cost divided by number of units [1] 4(b) Calculate total variable cost per month. Show your 2 Award only 1 mark if $5 million is written as part of the working. answer but is not given as the final answer. Award 2 marks for a correct answer. $ sign is not needed for 2 marks but million is. Award 1 mark for correct method but incorrect answer. Must have correct number of zeros e.g. Correct answer: 500 000 [0] • $5 million [2] • 5 million/5m [2] • 5 000 000 [2] Correct method but incorrect answer e.g. • Output × variable cost per unit [1] • 200 000 × $25 [1] If correct answer given with no working shown award 2 marks. 4(c) Outline two external costs MHL might create when 4 To use words from the stem as application, the reference producing its products. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant external cost (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: • Tyres or examples such as rubber Points might include: • Factories/factory • Loss of space/land use/deforestation [k] for the factories • 6 countries [app] • (Opportunities of) globalisation • Pollution or examples such as • 200 000 units (each month) smoke/fumes/noise/chemicals in the air [k] when • $25 (variable cost per unit) making tyres [app] • $500 000 (fixed costs) • Deplete natural resources [k] to make 200 000 units [app] Other appropriate examples can be credited. • Loss of wildlife [k] in the 6 countries [app] • Max 1 mark for examples of pollution. Other appropriate responses should be credited. 4(d) Explain two opportunities of globalisation for MHL. 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 opportunity 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). • Tyres or examples such as rubber • Factories/factory Points might include: • 6 countries • Increase potential sales/access more markets [k] for its • 200 000 units (each month) tyres [app] increasing revenue/increase market share • $25 (variable cost per unit) [an] • $500 000 (fixed costs) • Cheaper/access (better quality) raw materials from other countries [k] for its factories [app] could help Other appropriate examples can be credited. improve the profit margin [an] • Lower wages/cheaper labour [k] in the 6 countries [app] reducing (labour) costs [an] • Avoid/fewer quotas [k] which could limit quantity sold/able to sell [an] • Avoid/lower tariffs [k] so does not make products more expensive [an] • Access new technologies [k] which could improve efficiency/allow new product development [an] • Access to government grants (in other countries) [k] Other appropriate responses should be credited. 4(e) Explain two methods of communication a business 6 This is a general question so there are no marks for could use to communicate with its suppliers. Which is application. likely to be the best method to use? Justify your answer. Candidates must name the method to access the knowledge mark. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. For evaluation to be awarded justification will usually follow Award up to 2 marks for a justified decision as to which is on from relevant analysis of points. the best method of communication for a business to use when communicating with its suppliers. To access [eval], must discuss 2 valid methods of communication. Points might include: • Email [k] can be saved for future reference [an] Do not award answers such as written/verbal/visual as need • Phone/telephone calls [k] as these allow for (immediate) to specify the method. feedback [an] • (Online) meeting [k] allows everyone to discuss points/ask questions [an] • Video conference/Zoom/Teams/Google Meet/FaceTime [k] as people do not have to travel [an] • Text/SMS/WhatsApp/WeChat/(Facebook) messenger [k] but can contain limited information [an] • Letter [k] but time consuming to write/expensive to send [an] • Websites [k] but no feedback/one way communication [an] Other appropriate responses should also be credited. 4(e) Justification might include: One method is a meeting [k] allows everyone to discuss points at the same time [an]. Another option is an email [k] because it is quick to send [an]. Email is a better method because it could allow the business to get the inventory it needs in a timely manner whereas the meeting could take too long to arrange [eval], and while waiting the business may have to stop production temporarily [eval].