Business Studies 0450/13 October/November 2024: question paper and mark scheme

Mark scheme

1(a) Identify the lines labelled X and Y in Fig. 1.1. 2 Only award the first response given for each answer. Award 1 mark for each correct answer (max 2). X – Total cost(s) Y – Total revenue 1(b) Define ‘import tariff’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. A tax placed on imported goods when they arrive into a country [2] Partial definition e.g. type of tax [1] OR Tax on imported goods [1] Other appropriate responses should be credited. 1(c) Outline two ways BPT could lower its break-even level of output. 4 To use words from the stem as application, the reference must be appropriate (i.e. Award 1 mark for each relevant way (max 2). make sense) in relation to the point being Award 1 mark for each relevant reference to this business (max 2). made. Points might include: The following words are likely to be • Increase price [k] of its bicycles [app] appropriate for this question: • Lower fixed cost or examples e.g. reduce rent [k] below $50 000 [app] • Bicycles or related words e.g. chain, • Lower variable / raw material costs [k] so may consider importing more gears than 60% [app] • 60% / import (raw materials) • $50 000 (total fixed costs) Other appropriate responses should be credited. • 125 (break-even output) • (Export to) 8 countries • Batch production Other appropriate examples can be credited. 1(d) Explain two ways a depreciation in country A’s exchange rate might 6 To use words from the stem as application, affect BPT. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for identification of each relevant way (max 2). made. Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). The following words are likely to be appropriate for this question: Points might include: • Bicycles or related words e.g. chain, • Increased cost of imports [k] which would increase break-even gears output / increase in price [an] of bicycles [app] • 60% (of raw materials are imported) • Exports appear cheaper [k] which may increase demand/sales [an] in the • 125 (break-even output) 8 countries [app] • $50 000 (fixed costs) • May have to find alternative/cheaper suppliers [k] as imports its raw • 8 countries materials [app] which could take time / lead to production delays [an] Other appropriate examples can be Other appropriate responses should be credited. credited. 1(e) Do you think batch production is the best method of production for a 6 This is a general question so there are no business to use? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. Some points can be awarded as [k] or [an] Award up to 2 marks for relevant development of points. but do not award the same point twice. Award up to 2 marks for a justified decision as to whether batch production is the best method of production for a business to use. Points might include: Batch production: • (Some) flexibility [k] so can change what to make / quickly adapt to meet customer demands [an] • Production may not be greatly affected if machinery breaks down [k], so some output made [an] • Variety/range of products made [k] which could widen its customer base / help spread risk [an] 1(e) • Can motivate workers [k] leading to less absenteeism / lower labour turnover [an] • Time lost switching/resetting machines between batches [k] could lead to lost output / lower efficiency / lower productivity [an] • Need to move/store semi-finished goods [k] increased storage costs [an] • One fault could affect entire batch [k] leading to waste [an] Flow production [k] • High output [an] • Likely to benefit from (purchasing) economies of scale / discounts for bulk purchasing [an] reducing average costs [an] • Capital intensive methods can be used / fewer employees needed [an] lowering wage cost [an] • If one machine breaks down the whole production line will stop [an] • High set up costs [an] • Inflexible (if demand changes) [an] Job production [k]: • Unique / meet exact customer needs [an] which can help brand loyalty [an] • Can charge higher price [an] which may increase profit margin [an] • Skilled labour needed [an] which increases labour costs [an] • No economies of scale [an] leading to higher average cost [an] • Production can take a long time [an] lowering potential output [an] • Costs are higher as it is labour intensive [an] • Mistakes can be expensive to correct [an] Other appropriate responses should be credited. 1(e) Justification might include: Batch production is flexible [k] so can change what is made quickly to adapt to customer demands [an]. An alternative is flow production [k] which allows for high levels of output [an]. Batch production is the best method because there is limited value in producing a high level of output if there is no demand [eval]. Being able to adapt to changes in customer demand is likely to be more important to ensure customer loyalty / revenue. [eval]

Mark scheme

2(a) Define ‘inflation’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. An increase in the general price level of goods and services over time [2] Partial definition e.g. an increase in the price of goods/services [1] 2(b) Identify two characteristics of a successful entrepreneur. 2 Only award the first two responses given. Award 1 mark per characteristic (max 2). Points might include: • Risk-taker • Creative • Hard-working • Innovative • Effective communicator • Optimistic • (Self) confident • Independent • (Self) motivated / focused / determined / committed • Resourceful/adaptable • Leadership • Resilience / determination / patience • Initiative Other appropriate responses should be credited. 2(c) Outline two ways a business plan might help Ramon. 4 To use words from the stem as application, the reference must be appropriate (i.e. Award 1 mark for each relevant way (max 2). make sense) in relation to the point being Award 1 mark for each relevant reference to this business (max 2). made. Points might include: The following words are likely to be • Get a bank loan / finance / attract investors [k] if decides not to use appropriate for this question: crowdfunding [app] • Entrepreneur • Set targets / objectives / future planning [k] for his tutoring business [app] • Start-up / new business • Understand / reduce possible risks / threats [k] for him as an entrepreneur • Home tutoring / help to learn maths [app] • Franchise • Acts as a checklist / way to track progress / compare against goals [k] of • Increase in inflation his start-up / new business [app] • Crowdfunding • Helps decision-making [k] • Helps organise resources / labour requirements / marketing strategy [k] Other appropriate examples can be credited. Other appropriate responses should be credited. 2(d) Explain one advantage and one disadvantage to Ramon of buying a 6 To use words from the stem as application, franchise. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for identification of each relevant advantage/disadvantage (max made. 2). Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be Award 1 mark for each relevant explanation (max 2). appropriate for this question: • Entrepreneur Points might include: • Start-up / new business Advantages: • (Home) tutoring service / learn maths • Easier/quicker to build a customer base [k] which can help gain • (Increase in) inflation sales/revenue [an] for his tutoring service [app] • Crowdfunding • Training/advice offered by franchisor [k] which saves costs [an] which is • Business plan important for a start-up / new business [app] • Franchisor pays for advertising [k] which will reduce his cash outflows [an] Other appropriate examples can be calculated in his business plan [app] credited. • Banks may be more willing to lend finance to a franchisee [k] so may not need to use crowdfunding [app] • Sell under established / successful brand name [k] so easier to attract customers / can help reduce risk of failure [an] Disadvantages: • Cost (to buy franchise) [k] which he may not be able to afford [an] at a time when inflation is increasing [app] • Do not have total control / less independence [k] which may be why he became an entrepreneur [app] • Unable to make decisions that suit local area [k] • Must pay royalties / franchise fee / percentage of revenue / profit [k] which could reduce profit margin / increase costs [an] Other appropriate responses should be credited. 2(e) Do you think crowdfunding is the best source of finance for a start-up 6 This is a general question so there are no business to use? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. Some points can be awarded as [an] for Award up to 2 marks for relevant development of points. different methods but do not award the Award up to 2 marks for a justified decision as to whether crowdfunding is the same point twice. best source of finance for a start-up business. Points might include: • No initial fee is payable [k] so does not increase cash outflows [an] • Allows for the public reaction to be tested / help advertise [k] which could lead to more customers [an] • Proposal may be rejected [k] using time which could have been used for other purposes [an] • May allow competitors the opportunity to learn more about your business before launch [k] which could lead to fewer sales / less revenue [an] • No guarantee can raise full amount / not raise enough funds [k] so may have to find another source [an] Other sources might include: • Own savings [k] as there is no need to repay [an] but may not have sufficient funds [an] • (Bank) loan [k] so more likely to raise full amount needed (quickly) [an] but will need to pay interest [an] Other appropriate responses should be credited. Justification might include: An advantage of crowdfunding is no initial fee is payable [k], so it does not increase cash outflows [an]. An alternative is a bank loan [k] which could raise the full amount needed [an]. Crowdfunding is the best source because a new business is risky so the bank may not lend to them anyway [eval] and even if it did, it may not be able to afford the repayments [eval].

Mark scheme

3(a) Define ‘private sector’. 2 Do not award: • Examples Award 2 marks for a full definition. Award 1 mark for a partial definition. • Features of a sole trader, partnership or limited company The part of the economy that is controlled by individuals/companies for profit [2] OR When business activities are owned by individuals / group of individuals [2] Partial definition e.g. run by individuals [1] 3(b) Calculate the value of LRL’s market share in 2023. 2 Award only 1 mark if $36m is written as part of the answer but is not given as the Award 2 marks for a correct answer. final answer. Award 1 mark for correct method but incorrect answer. $ not needed. Correct answer [2] $36 million Need million for 2 marks. OR $36 000 000 Method e.g: • (Percentage ÷100) x total value of sales in market = value of business sales [1] • 120 × 30% [1] If correct answer given with no working shown, award 2 marks. 3(c) Outline two ways LRL could contribute to sustainable development. 4 To use words from the stem as application, the reference must be appropriate (i.e. Award 1 mark for identification of each relevant way (max 2). make sense) in relation to the point being Award 1 mark for each relevant reference to this business (max 2). made. Points might include: The following words are likely to be • Reduce amount/number of resources used [k] when making skincare appropriate for this question: products [app] • Skincare or examples such as face • Develop environmentally friendly products [k] which could help the cream marketing mix [app] • Private sector (business) • Use environmentally friendly methods of production [k] at this private • Marketing mix sector business [app] • Customer loyalty • Use environmentally friendly materials / buy materials from sustainable • 30% (market share) sources [k] which may help improve customer loyalty [app] • $120 million (total value of market • Use environmentally friendly packaging / reduce packaging sales) • Reduce waste [k] • $36 million (revenue) • Reuse products/materials [k] • Recycle products/materials [k] Other appropriate examples can be • Replant trees [k] credited. Other appropriate responses should be credited. 3(d) Explain two advantages to LRL of maintaining customer loyalty. 6 To use words from the stem as application, the reference must be appropriate (i.e. Award 1 mark for each relevant advantage (max 2). make sense) in relation to the point being Award 1 mark for each relevant reference to this business (max 2). made. Award 1 mark for each relevant explanation (max 2). The following words are likely to be Points might include: appropriate for this question: • Easier to match products to existing customer needs [k] reducing wastage • Skincare or examples such as face [an] as know which are the popular types of skincare products [app] cream • Improve / good reputation / brand image [k] so less promotion • Marketing mix needed / lower cost (of advertising) [an] by this private sector business • Sustainable development [app] • 30% (market share) • Increase sales / customers [k] which could increase revenue / market • Private sector business share [an] above $36m [app] • $120 million (total value of market • Encourages existing customers to try new products [k] sales) • May be able to increase prices [k] which would increase profit margin [an] • $36 million (revenue) Other appropriate responses should be credited. Other appropriate examples in context can be credited. Some points could be [k] or [an] but do not award the same point twice e.g. repeat customers. Increase market share is [an] only. 3(e) Explain two elements of the marketing mix. Which do you think is the 6 This is a general question so there are no most important element for a business? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. Some points could apply to more than one Award up to 2 marks for relevant development of points. option but only award the same point once. Award up to 2 marks for a justified decision as to which is the most important element of the marketing mix for a business. To access evaluation marks, candidates must discuss two elements of the Points might include: marketing mix. 3(e) Promotion [k] • Raises awareness / informs potential customers [an] leading to more sales [an] • Attracts / persuades potential customers [an] increasing revenue [an] • Creates / builds brand image [an] increasing customer loyalty [an] • Way to communicate with customers [an] Product [k] • Without a product there is nothing to sell / if dislike the product customers will not buy it [an] • A poor / bad quality product will not last long in the market [an] so time / money spent developing it would be wasted [an] • Good quality product can encourage customer loyalty [an] • Good quality can improve brand image [an] Place [k] • Close / near target market / customers [an] to ensure sales [an] • A suitable location might have high rent [an] leading to increased costs / higher prices [an] Price [k] • A low price could create image of low quality [an] damaging its reputation [an] • If price is too low, may not cover costs [an] • If the price is too high, the business may be less competitive [an] lowering market share [an] • If the price is too high, could lead to fewer sales (as customers cannot afford it) [an 3(e) Other appropriate responses should be credited. Justification might include: One element is promotion [k]. This is important as more people are aware of your business [an]. The product also matters [k] as this is what people are buying so without a product there is nothing to sell [an]. Product is the most important element, because if it is unique, this can help the business standout [eval] which means the business has a better chance of attracting / maintaining customers. [eval]

Mark scheme

4(a) Define ‘commission’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Payment to employees relating to the number/value of sales made [2] Partial definition e.g. money based on sales / what sold [1] 4(b) Identify two external users of accounts. 2 Only award the first two responses given. Award 1 mark per user of external accounts (max 2). Points might include: • Banks/lenders • Suppliers • Government • Potential investor • Local community/pressure groups Other appropriate responses should be credited. 4(c) Identify four ways the information in a statement of financial position 4 Only award the first four responses given. can be used. Award 1 mark per way (max 4). Points might include: • Calculate working capital • Calculate current ratio • Calculate acid test ratio • Shows how the business finances its activities / shareholders can see how any expansion has been funded • Shows the assets the business owns / what the business owns • Show value of liabilities / what the business owes • Support loan application / raise finance / show investors • Show value of the business / what the business is worth • Compare performance over time • Compare performance against competitors Other appropriate responses should be credited. 4(d) Explain two possible reasons why providing training for its employees is 6 To use words from the stem as application, important to RHN. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for identification of each relevant reason (max 2). made. Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). The following words are likely to be appropriate for this question: Points might include: • Clothing • More skilled / flexible employees [k] so can cover absences of others [an] • Shops/retailer in its 50 shops [app] • 290 (employees) • Fewer mistakes / better quality (service) [k] from its 290 employees [app] • Commission (financial reward) which could improve its reputation [an] • Internal recruitment • Increases motivation [k] which can help reduce labour turnover [an] which • $1.5m (profit) is helpful as uses internal recruitment [app] • 50 (locations) • Fewer customer complaints [k] about its clothing [app] increasing customer loyalty [an] Other appropriate examples can be • Less supervision needed [k], so managers have time to focus on other credited. activities [an] • Improves efficiency/productivity [k] Some points can be [k] or [an] but only • Fewer accidents / ensure safe working conditions [k] award once. • Able to train others [k] reducing training costs [an] The following are [an] only: • Provide new ideas / improves innovation [k] • Better reputation • Helps attract (potential) employees [k] • Increase sales • Helps introduce a new process [k] • Employee loyalty / lower labour turnover Other appropriate responses should be credited. • Customer loyalty 4(e) Do you think the advantages for a business of using internal recruitment 6 This is a general question so there are no are greater than the disadvantages? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. Some analysis could be used for more than Award up to 2 marks for relevant development of points. one point, but only award once. Award up to 2 marks for a justified decision as to whether the advantages of internal recruitment for a business are greater than the disadvantages. Points might include: Advantages: • Employees know the business [k] so can start work more quickly / less training needed [an] • Low cost/cheaper [k] which reduces cash outflows / as do not have to spend funds on job advertisements [an] • Less time-consuming / quicker [k] which means time can be used for other purposes [an] • Can motivate employees [k] so reducing labour turnover / encourages employee loyalty / improve efficiency [an] • Company knows the employee [k] which reduces risk / likelihood of employing someone who is not appropriate for the job [an] Disadvantages: • Suitable candidates may not be available / employees may not have experience / skills needed [k] which could lead to mistakes / wrong actions taken [an] • Reduces pool / fewer potential candidates [k] • Would create another vacancy for the business to fill [k] • Could create resentment / jealousy among those not selected [k] which could demotivate these employees [an] • Lack of new ideas [k] so business may become less competitive [an] 4(e) Other appropriate responses should be credited. Justification might include: Internal recruitment is cheaper [k] which reduces cash outflows [an]. However, the current employees may not have skills needed [k] leading to mistakes being made [an]. The potential disadvantages are greater because those mistakes could damage the businesses reputation [eval] which is likely to cost the business more money in the long term. [eval]