Business Studies 0450/11 October/November 2019: question paper and mark scheme

Mark scheme

1(a) What is meant by ‘income statement’? 2 Do not award ‘shows income’ on own as this is repetition. Clear understanding [2]: A financial document that records the revenue, costs and profit for a given period of time. For 2 marks must have time element as well. Some understanding [1]: Shows revenue and costs / shows profit 1(b) Identify the effect of an increase in the cost of materials on 2 each of the following: Cost of sales: increase costs Gross profit: decrease gross profit Award 1 mark per effect identified. 1(c) Identify and explain two ways in which BFF’s managers could 4 Application marks may be awarded for appropriate use of use information contained in the income statement. the following: Knowledge [2 × 1] – award 1 mark for each way. • screens • increase in material costs Application [2 × 1] – award 1 mark for each explanation in context. • computers • imports increased Points might include: • need to remain competitive • technology • Able to calculate the profitability ratios [k] to see the effect of the • increase prices increase in material costs [app] • manufacturers • Helps assess efficiency [k] to see benefit from advances in technology [app] • Able to compare performance with similar businesses [k] • Able to compare performance between different time periods [k] • Show shareholders / owners how business performed [k] • It is used to measure business success / decide if the business should continue trading [k] • Used to support an application for a loan [k] 1(d) Identify and explain two ways changes in technology used in 6 Application marks may be awarded for appropriate use of production could help BFF to remain competitive. the following: Knowledge [2 × 1] – award 1 mark for each relevant way. • screens • increase in material costs • computers Application [2 × 1] – award 1 mark if relevant reference made to this • imports increased business. • increase prices • manufacturers Analysis [2 × 1] – award 1 mark for each relevant explanation. Points might include: • Machines replace labour [k] helping improve its income statement [app] so less wages need to be paid [an] • Wider range of products [k] such as screens [app] to appeal to more customers or markets [an] • Able to produce more / improved productivity / more efficient [k] Accept Machines work 24/7 as either [k] or [an] of so able to lower prices [an] and compete with imports [app] why output rises. • Technology improves flexibility [k] so the business can react to changes in demand [an] for computers [app] • Reduces waste / less errors / consistent quality [k] 1(e) Do you think BFF should increase its prices? Justify your 6 Application marks may be awarded for appropriate use of answer. the following: Knowledge [1] – award 1 mark for identification of relevant point(s) • screens • advances in technology Application [1] – award 1 mark for a relevant reference made to this • increase in material costs business • computers • imports increased Analysis [2] – award up to 2 marks for relevant development of • need to remain competitive point(s) • manufacturers Evaluation [2] – justified decision made as to whether BFF should increase its prices. Points might include: • Could increase revenue [k] so more money available to cover costs [an] such as increase in material costs [app] • Could lead to fewer customers [k] as higher price could encourage customers to switch to competitors [an] so difficult to remain competitive [app] • They need to increase prices to cover cost [k] because of the increase in material costs [app] • Gives an impression of quality [k] • Keeping prices low may increase market share [k] because it is a competitive market [app] as lower price attracts customers [an]

Mark scheme

2(a) Identify two stages of the business cycle. 2 Award 1 mark for each stage identified. Stages: Growth, boom, recession, slump. 2(b) What is meant by ‘redundancy’? 2 For 2 marks must clearly understand idea that it is the role that no longer exists Clear understanding [2]: e.g. job position has gone and so the employee is no longer required Do not award reasons why the job may no longer exist Termination of employment because the job is no longer needed Some understanding [1] e.g. loses job (through no fault of their own) [1] or job role has gone [1] 2(c) Identify and explain two ways a trade union could help WKN’s 4 Application marks may be awarded for appropriate use of employees. the following: Knowledge [2 × 1] – award 1 mark for each way identified • retailer • household goods OR plates OR brushes Application [2 × 1] – award 1 mark for each explanation in context • challenging stage of business cycle • marketing department OR head office Points might include: • 1800 OR redundancy • Negotiate or help improve pay [k] for shop employees [app] • 200 OR shops • profit fell 80% OR $5m • Improved working conditions or health and safety [k] in head • 100 new jobs office [app] • Gives strength in numbers/collective bargaining so more likely to achieve demands [k] when dealing with head office [app] • Take action (strikes/protests) [k] to prevent redundancy [app] • Provides services such as insurance / training / social activities / discounts [k] • Resolve conflict between employer and employees [k] • Advice / legal support [k] 2(d) Identify and explain two advantages to WKN of maintaining 6 Application marks may be awarded for appropriate use of customer loyalty. the following: Knowledge [2 × 1] –award 1 mark for each relevant advantage • retailer • sells household goods OR plates OR brushes Application [2 × 1] – award 1 mark for each relevant reference • challenging stage of business cycle made to this business • marketing department OR head office • 1800 OR redundancy Analysis [2 × 1] – award 1 mark for each relevant explanation • 200 OR shops Relevant points might include: • profit fell 80% OR $5m • Increase sales [k] of its household goods [app] • 100 new jobs • trade union • Easier to match products to existing customer needs [k] so know what to stock in its shops [app] reducing wastage [an] • Maintain competitiveness [k] Do not award ways to increase customer loyalty • Current customers recommend products [k] so less promotion needed [an] • Cheaper than trying to attract new customers [k] • Reputation / brand image improves [k] • May be able to increase prices and keep customers [k] • Provides a sense of security for owners [k] 2(e) Do you think WKN should select all the workers for the new 6 Application marks may be awarded for appropriate use jobs from those about to be made redundant? Justify your of the following: answer. • retailer Knowledge [1] – award 1 mark for identification of relevant point (s) • household goods OR plates OR brushes • challenging stage of business cycle Application [1] – award 1 mark if relevant reference made to this business • marketing department OR head office • 1800 Analysis [2] – award up to 2 marks for relevant development of • 200 OR shops point(s) • profit fell 80% OR $5m • 100 new jobs Evaluation [2] – justified decision made as to whether WKN should • trade union select the workers for the new jobs from those facing redundancy • customer loyalty Points might include: • Do not need to advertise jobs externally [k] so lower (recruitment) costs [an] • Know abilities and skills of employees [k] The analysis must relate to the impact upon the business rather than the employee • Existing employees have good knowledge of customer requirements [k] as have experience of working in its shops Do not award answers which discuss how the [app] candidates are selected for redundancy • Workers might not have skills [k] which could lead to poor work [an] reducing customer loyalty [app] • May not want or be able to move locations [k] to head office [app] so few employees will want to apply [an] • Recruitment of new workers will bring fresh ideas [k]

Mark scheme

3(a) What is meant by ‘fixed costs’? 2 Do not award examples as this does not explain the term. Clear understanding [2] e.g. costs that do not change [1] as the level of activity / output / sales changes [1] Costs which have to be paid whether the business produces any products or not Some understanding [1]: e.g. costs that stay the same 3(b) Calculate the forecast revenue per week for the new café. 2 $ sign not needed to award full marks Good application [2]: $1300 Some application [1]: 325 × 4 OR number of customers × average spend (price) 3(c) Identify and explain two advantages to Keila’s business of 4 Application marks may be awarded for appropriate use of using free samples as a method of promotion. the following: Knowledge [2 × 1] – award 1 mark for each advantage identified • successful bakery • small shop Application [2 × 1] – award 1 mark for each explanation in context • cakes / drinks OR related words e.g. taste • popular tourist location Points might include: • correct use of numbers and information from Table • Increases awareness of her products [k] with tourists [app] 1 e.g. 325 • $1300 • Encourages customers to try her products [k] and visit the café • café [app] • (primary market) research • Tempt customer to buy more [k] helping her remain successful [app] • Way to get feedback [k] so she improves her cakes [app] • Can test out new product ideas [k] identified from research [app] • Customers understand the quality of the product [k] 3(d) Identify and explain one advantage and one disadvantage to 6 Application marks may be awarded for appropriate use Keila’s business of using primary market research. of the following: Knowledge [2 × 1] – award 1 mark for a relevant advantage / • cakes / drinks OR related words e.g. taste disadvantage • small shop • successful bakery Application [2 × 1] – award 1 mark for each relevant reference • popular tourist location made to this business • correct use of numbers and information from Table 1 e.g. 325 Analysis [2 × 1] – award 1 mark for each relevant explanation • $1300 Relevant points might include: • free samples • café Advantages: • expansion • Up-to-date [k] so able to make more accurate decisions [an] such as whether to open the café [app] • Specific to her purpose [k] • Information is not available to other competitors [k] so may provide a competitive advantage [an] for this small shop [app] Disadvantages: • High cost [k] to find out views on her bakery [app] which will increase her expenses [an] • Takes long time to collect [k] • Can be bias in questions or how questions are asked [k] leading her to make the wrong decisions [an] 3(e) Do you think Keila should open the new café? Justify your 6 Application marks may be awarded for appropriate use of answer using the information in Table 1. the following: Knowledge [1] – award 1 mark for identification of relevant point(s) • successful bakery Application [1] – award 1 mark for a relevant reference made to this • small shop business • cakes / drinks Analysis [2] – award up to 2 marks for relevant development of • popular tourist location point(s) • free samples Evaluation [2] – justified decision made as to whether Keila should • primary market research open the new café • correct use of numbers and information from table 1 e.g. 325 Points might include: • $1300 • She expects to attract enough customers to cover her fixed costs [k] as she predicts 325 [app] Application and analysis can be awarded for calculation • TR – TC [k] $1300 [app] – $1150 [an] leaving a profit of £150 of: [an] • total variable costs $650 [app + an] • TVC = VC x Output [k] $2 × 325 [app] = $650 [an + an] • total costs $1150 [app + an + an] • TC = TFC + TVC [k] $500 + $650 [app + an] = $1150 [an + an] • gross profit $650 [app + an + an] • profit $150 [app + an + an] • Has relevant business experience [k] as runs a successful • break-even output 250 [app + an + an] bakery [app] • 75 more customers [app + an + an] • Spreads risk [k] OFR applies if candidate uses incorrect total revenue • Cost of shop and labour to run the café [k] figure calculated in 3b to do subsequent calculations • How reliable is the data gathered [k] from her primary research [app] • Does she have time / finance to run both businesses [k]

Mark scheme

4(a) What is meant by ‘span of control’? 2 Clear understanding [2]: Number of subordinates working directly under an individual OR manager Number of subordinates reporting to each supervisor / manager Some understanding [1]: E.g. number of subordinates working under an individual OR manager Who you are responsible for 4(b) What is meant by ‘uses specialisation’? 2 Clear understanding [2]: E.g. way in which work is divided so each worker concentrates on a specific task so become expert at it When people or business concentrate on what they are best at Some understanding [1]: E.g. workers only do one job 4(c) Identify and explain two possible reasons why VXH has grown 4 Application marks may be awarded for appropriate use of quickly. the following: Knowledge [2 × 1] – award 1 mark for each reason identified • fruit or related words e.g. flavours • soft drinks Application [2 × 1] – award 1 mark for each explanation in context • batch production • specialisation Points might include: • factory • Closure / takeover of competitor [k] so fewer businesses • 40 OR 80 (workers)/motivation problems making soft drinks [app] • job rotation or financial bonus • 2 years • Changes in customer tastes / fashion [k] • Span of control (increased) • Spotted a new opportunity in the market [k] • Change in legal controls / rules [k] • Introduction of new technology [k] so able to take advantage of specialisation [app] • Increase in productivity [k] 4(d) Identify and explain two possible reasons why VXH uses batch 6 Application marks may be awarded for appropriate use of production. the following: Knowledge [2 × 1] – award 1 mark for each relevant reason • fruit or related words e.g. flavours • soft drinks Application [2 × 1] – award 1 mark for each relevant reference • specialisation made to this business • factory • 40 OR 80 (workers) / motivation problems Analysis [2 × 1] – award 1 mark for each relevant explanation • job rotation or financial bonus Relevant points might include: • 2 years • Allows variety of products to be made [k] • Span of control (increased) • Flexible [k] as able to change product easily to meet changes in customer demand [an] for different flavours [app] • Provides some variety of jobs to workers [k] helping improve employee motivation [app] so fewer employees might leave [an] • Allows use of specialist skills [k] so able to take advantage of specialisation [app] to increase output [an] • Level of demand does not justify the use of flow production [k] • Since larger numbers are made [k] lower unit costs [an] • Production not affected if machinery breaks down [k] • Buying in bulk [k] 4(e) Do you think VXH should use job rotation or financial bonuses 6 Application marks may be awarded for appropriate use of to increase employee motivation? Justify your answer. the following: Knowledge [1] – award 1 mark for identification of relevant point(s) • fruit or related words e.g. flavours • soft drinks Application [1] – award 1 mark for a relevant reference made to this • batch production business • specialisation Analysis [2] – award up to 2 marks for relevant development of • factory point(s) • 40 OR 80 (workers) motivation problems • 2 years Evaluation [2] – justified decision made as to whether VXH should • Span of control (increased) use job rotation or financial bonuses to increase employee motivation Points might include: Job rotation: • Prevents workers becoming bored doing the same task repeatedly [k] which could increase output [an] • Need to provide training [k] to the 80 employees [app] which increases cost [an] • Helps improve flexibility [k] as workers can switch if someone is absent [an] • Workers may not be good at the new task [k] so productivity decreases [an] 4(e) Financial Bonus: • Increases costs to the business [k] • Some employees may not be motivated by money [k] • Can lead to conflict / demotivation if some workers don’t get this [k]