Business Studies 0450/12 October/November 2025: question paper and mark scheme

Mark scheme

1(a) Define ‘quality assurance'. 2 To gain both marks, the answer must show the idea of: Award 2 marks for a full definition. Award 1 mark for a partial definition. • Check quality / product • throughout/at every stage of the • Checking for quality (standards) throughout production process / production process. checking quality at every stage [2] • A method of improving quality by trying to prevent mistakes happening in the production process [2] Partial definition e.g. • Checking work done / checking quality multiple times [1] • Try to prevent mistakes [1] 1(b) Identify two reasons why a business might reduce the size of its 2 Only award the first two responses given. workforce. Award one mark per reason (max 2). Points might include: • Fall/decrease in demand/sales/revenue / recession • Introduction of automation/machinery/technology / becoming capital intensive • Financial problems / (need) to reduce costs • Closure of factory/shop/office • Merger/takeover • Relocation / move its operations (to another part of country/world) Other appropriate responses should be credited. 1(c) Outline, with reference to BEI, the difference between redundancy and 4 To use words from the stem as application, dismissal. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for showing understanding of redundancy (max 1). made. Award 1 mark for showing understanding of dismissal (max 1). 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: • Multinational company / MNC • Aeroplanes Redundancy: • Quality assurance • The job is no longer needed/exists [k] as business is downsizing [app] • Downsize/reduce size of its workforce • The worker has done nothing wrong [k] when making aeroplanes [app] • 5000 (employees) • Being asked to leave because the skills/experience of the employee are • Employee A is often late to work no longer needed [k] • Employee A worked for 1 year at BEI Dismissal: Other appropriate examples can be • Employee is incompetent/cannot do the job / not meeting targets [k] at credited. the multinational company [app] • Being asked to leave because of poor behaviour/conduct of Candidates must make it clear in the employees [k] which may affect quality assurance [app] answer which term the point relates to. • Termination of employment by the employer / when employee is told/made to leave job against will of employee [k] Max 1 [k] for points about redundancy and max 1 [k] for points about dismissal. Other appropriate responses should be credited. Do not award: • Sacked / fired / laid off on own 1(d) Explain one advantage and one disadvantage of BEI making employee A 6 To use words from the stem as application, redundant. 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: • Multinational company / MNC Points might include: • Aeroplanes • Quality assurance Advantages: • Downsize (its workforce) • May have to pay out less in compensation/redundancy payment [k] as • 1 year (at BEI) only been there for 1 year [app] which could help lower cash outflows / • 12 years (at other businesses) use funds for other areas of the business [an] • Popular (with other employees) • Could improve productivity/efficiency [k] because they are often late for • Often late work [app] so orders are met on time [an] • Able to use (most of) the machinery • 2 IGCSEs Disadvantages: • 5000 (employees) • May lose a lot of experience [k] as worked at another business for 12 years [app] which could lead to more mistakes / less output [an] Other appropriate examples can be • May lose skills [k] as employee A can use most of the machinery [app] credited. which may lead to production delays [an] • May lower motivation of other employees [k] as employee A is popular Some points could be awarded as [k] or with them [app] which could increase labour turnover [an] [an] but only award once. • May have to train someone else [k] which can increase costs [an] • Lower output [k] Some [an] could be used for different points but only award once. Other appropriate responses should be credited. The following are [an] only: • Increase costs on its own. • Labour turnover/absenteeism. 1(e) Explain two possible benefits to a country of a multinational company 6 This is a general question so there are no locating there. Which benefit is likely to be the most important? Justify marks for application. your answer. To access evaluation marks, candidates Award up to 2 marks for identification of relevant points. must identify two valid benefits. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which benefit is likely to be For evaluation to be awarded justification the most important to a country. will usually follow on from relevant analysis of points. Points might include: • Increase jobs/employment opportunities [k] increasing people’s income Some points could be awarded as [k] or [an] AND/OR reducing unemployment [an] AND/OR improve standard of [an] but only award once. living/reduce poverty [an] • Generate taxes [k] which may be used to improve public services [an] Some [an] can be used for different points • More competition [k] which could increase choice/quality of products / but only award once. may lead to lower prices [an] • Increase reputation/recognition of country [k] which could encourage other businesses to set up/invest in the country [an] • Knowledge sharing / increase skills / gain technical knowhow [k] which could help improve production methods / increase efficiency/output [an] • Improve infrastructure/new investment [k] Other appropriate responses should be credited. Justification might include: One benefit to the country is increased competition [k] which could increase the choice of products available [an]. It could also increase the number of jobs [k] reducing unemployment. [an] The extra jobs are likely to be the most important because this could improve the standard of living for many families [eval] who may then be able to afford to buy the wider choice of goods [eval].

Mark scheme

2(a) Define ‘cash flow forecast’. 2 First mark for understanding it refers to cash/money in(flows) and out(flows). Award 2 marks for a full definition. Award 1 mark for a partial definition. Second mark is for idea that it is an • Estimate of future cash inflows and outflows of a business (usually on a estimate or future values [+1]. month-by-month basis) [2]. Partial definition e.g. • Shows the cash inflows and outflows of a business [1]. 2(b) Identify two reasons why cash is important for a business. 2 Only award the first two responses given. Award 1 mark per reason (max 2). Can award pay expenses / short-term debts / day-to-day costs when no specific Points might include: examples given. Examples of day-to-day costs/expenses include: • Pay employees/wages/salary • Pay suppliers/trade payables / raw materials / inventory • Pay rent • Pay insurance • Pay utilities e.g. heating/lighting/water/power • Pay advertising • Pay interest (on loans) / repay loan Other answers include: • For use in an emergency / to pay unexpected costs • Ensure survival / business may be forced to close if cannot pay its debts Other appropriate responses should be credited. 2(c) Identify four functions of management. 4 Only award the first four responses given. Award 1 mark per function (max 2). Do not award alternative words. Four from: • Control • Coordinate • Plan • Organise • Command 2(d) Explain two ways OTK could overcome a short-term cash flow problem. 6 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. Award 1 mark for each relevant explanation (max 2). The following words are likely to be Points might include: appropriate for this question: • Small (business) • Overdraft [k] as this would allow the business to spend more than it has in • Jewellery its current account [an] for this jewellery business [app] • Shop • Ask suppliers for longer to pay [k] which would delay/decrease cash • Centre of Main City outflows [an] for more than 30 days [app] • (No) ecommerce • Short-term bank loan [k] for the shop [app] increasing cash inflows quickly • 30 days (later) [an] • Local suppliers • Delay purchase of non-current assets [k] keeping more cash in the business [an] Other appropriate examples can be • Sell (non-current) assets [k] generates cash inflows [an] credited. • Ask customers to pay sooner / offer discounts to customers to pay more quickly [k] Analysis must show effect of method on cash inflow/outflow. Other appropriate responses should be credited. Can award: • Increase cash inflows as [k] or [an] • Decrease cash outflows as [k] or [an] 2(e) Explain two threats to a business of using ecommerce. Which threat is 6 This is a general question so there are no likely to be the most important? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. To access evaluation must discuss two Award up to 2 marks for relevant development of points. valid threats. Award up to 2 marks for a justified decision as to which threat is likely to be most important to a business. For evaluation to be awarded justification will usually follow on from relevant analysis Points might include: of points. • Increased/more competition [k] so may have to set lower prices (to compete) / may have to spend more on advertising/promotion [an] Some points can be [k] or [an] but only • Need to design/build website [k] which increases costs [an] award once e.g. high transport costs. • Time/cost for maintenance/updating of the website [k] so may need to employ someone to do this [an] Some analysis could be awarded for • No face-to-face contact with customer / suppliers / lack of personal different threats, but only award once. service [k] so difficult to gain feedback [an] AND/OR may be difficult to build customer loyalty / supplier relationships / [an] Points must focus on the impact on • Need to deliver the products to customers [k] increasing business and not on customers. transport/postage costs [an] leading to lower profit margin [an] • Technical problems/no power [k] so may lose potential sales [an] • Security threats / risk of hacking / computer viruses / data theft/fraud / scams [k] which could damage its reputation [an] AND/OR reduce customer loyalty [an] • Risk of bad reviews [k] lowering sales AND/OR revenue [an] • High level of returns [k] Other appropriate responses should be credited. Justification might include: One threat is an increase in competition [k] so may have to set lower prices (to compete) [an]. Another threat is technical problems [k] so the business may lose potential sales [an]. Technical problems are likely to be the most important threat because if customers cannot access the website setting a lower price may be ineffective [eval] so gaining any revenue could be difficult to achieve. [eval].

Mark scheme

3(a) Define ‘partnership’. 2 For two marks need the idea of owned/formed and it involves at least two Award 2 marks for a full definition. Award 1 mark for a partial definition. people. • Two (or more) people agree to jointly own a business (together) [2] • A business formed by two or more people [2] Partial definition e.g. • A business run/operated/managed/controlled/lead by two (or more) people [1] 3(b) Identify two ways to measure the size of a business. 2 Only award the first two responses given. Award 1 mark per way (max 2). Do not award: • Profit Points might include: • Capital on its own • (Number of) employees / size of workforce / (amount of) labour • Value of sales/revenue • Number/amount of customers / volume of output / number of sales • Value of output • (Value of) capital employed Other appropriate responses should be credited. 3(c) Outline two pricing methods Miguel could use. 4 To use words from the stem as application, the reference must be appropriate (i.e. Award 1 mark for each relevant method (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 • Cost-plus pricing [k] to cover the costs of the gym [app] appropriate for this question: • Penetration pricing [k] as it is a new business [app] • Gym / sports club / club • Competitive / competition pricing [k] based on the location [app] • Fitness / classes / yoga or related • (Price) skimming [k] for some of the classes [app] words e.g. instructors • Promotional pricing [k] based on its market research results [app] • (Business) partnership / sister • (Remain) small Other appropriate responses should be credited. • New/start-up business • Secondary/market research • (Suitable) location Other appropriate examples can be credited. 3(d) Explain one advantage and one disadvantage to Miguel of using 6 To use words from the stem as application, secondary market research. 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: • Gym / sports club / club Points might include: • Fitness / classes / yoga or related Advantages: words e.g. instructors • Low cost/free [k] which is important for a new business [app] so has funds • (Business) partnership / sister for other activities [an] • (Remain) small • Readily available [k] so saves time / has time to focus on other issues • Method of pricing [an] such as deciding a pricing method [app] • (Suitable) location • More/wide(r) range of information [k] about classes/yoga [app] which • New/start-up business could help increase demand/sales [an] Other appropriate examples can be Disadvantages: credited. • Out-of-date information [k] for the gym [app] leading to wrong decisions being taken [an] Some points can be [k] or [an] but only • Data is available for all businesses [k] so may not help create competitive award once e.g. lower cost, saves time. advantage [an] so may not help the partnership [app] • May not be relevant/specific to business needs [k] for this small business [app] which could result in customer needs not being met reducing customer loyalty [an] • May not be reliable [k] as not up to date [an] Other appropriate responses should be credited. 3(e) Do you think access to employees is the most important factor for a new 6 This is a general question so there are no business to consider when deciding on a suitable location? Justify your marks for application. answer. Evaluation can only be awarded if Award up to 2 marks for identification of relevant points. candidates discuss access to employees. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether access to For evaluation to be awarded justification employees is the most important factor for a new business to consider when will usually follow on from relevant analysis deciding on a suitable location. of points. Points might include: Some points could be [k] or [an] but only Access to employees: award once. • Availability/number of employees [k] as if high employment may be difficult to find enough employees / if many available could pay lower Some [an] could be used for different wages [an] helping to lower costs [an] points but only award once. • Distance/proximity from workers/workplace [k] as if far may increase transport costs / if many close it may be easier to recruit [an] Answers must be from the business • May need skilled/trained workers [k] to provide a good level of viewpoint, not the employee. service/high(er) output / may not be suitable workers nearby [an] • Level of wages/salary (in local area) [k] if high wages need to be paid it could increase costs [an] Other factors might include: • Access to customers/demand / proximity to market [k] to increase sales [an] AND/OR revenue [an] • Availability of suitable premises/rent [k] as high rent will increase fixed costs [an] • Number of competitors [k] may lead to high/low footfall [an] • Distance to/from suppliers/transport links [k] which could increase transport costs [an] • Access to raw materials [k] • Legal controls [k] • Government grants [k] • Local infrastructure e.g. internet/water/electricity [k] • Personal preference [k] 3(e) Other appropriate responses should be credited. Justification might include: Availability of employees as if high employment may be difficult to find enough employees [k] reducing level of output [an]. Another factor is government grants [k] which could help pay the start-up costs [an]. The grant is likely to be the most important factor for a new business because without enough finance, there may be no business [eval] and there would be no need to worry about recruiting employees [eval].

Mark scheme

4(a) Define ‘fixed costs’. 2 Do not award: • Answers which confuse the term Award 2 marks for a full definition. Award 1 mark for a partial definition. with variable costs. • Examples. • Costs that do not change with the level of output/sales [2] • Costs that do not vary in the short run with the number of items sold/produced [2] Partial definition e.g. • Costs that do not change [1] 4(b) Calculate DJU’s average cost per week. Show your working. 2 Award only 1 mark if $7 is written as part of the answer but is not given as the final Award 2 marks for a correct answer. Award 1 mark for correct method but answer. incorrect answer. $ sign not required. Correct answer: $7 or 7 [2] Max 1 if answer refers to 7 units. Correct method but incorrect answer e.g. • Total cost (of production) / total output [1] • $595 000 / 85 000 [1] If correct answer given with no working shown, award 2 marks. 4(c) Outline two ways lower interest rates might affect DJU. 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 appropriate for this question: • Increased demand/sales [k] for its clothing [app] • Clothing or examples such as • Lower costs / cheaper to borrow money [k] for the factory [app] jeans/trousers • Encourage DJU to invest (more) in the business / more likely to apply for • 90 (employees) a loan [k] as the business is considering ways to grow [app] • Factory • Use specialisation Other appropriate responses should be credited. • Grow/expand the business / takeover a competitor • $595 000 (total costs per week) • $400 000 (fixed costs per week) • 85 000 (units per week) • $7 (average cost) OFR applies Other appropriate examples can be credited. 4(d) Explain one advantage and one disadvantage to DJU of using 6 To use words from the stem as application, specialisation when making its products. 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: • Clothing or examples such as jeans Points might include: and trousers Advantages: • 90 (employees) • Higher output/quantity produced [k] of clothing [app] so able to meet • Factory orders (on time) [an] • $595 000 (total costs per week) • Quicker/cheaper to train employees [k] so does not increase total cost • $400 000 (fixed costs per week) costs [an] above $595 000 (per week) [app] • 85 000 (units per week) • Increased efficiency [k] which can increase output / lead to less waste • (Different ways a) business can [an] in the factory [app] grow/takeover a competitor • Employee should become a skilled/expert / employee can specialise in • Reduction in interest rates what they are good at [k] becoming more efficient in that task [an] • $7 (average cost) OFR applies • Easier to use machinery to perform tasks [k] which can speed up production [an] Other appropriate examples can be • Fewer mistakes/errors made / better quality [k] leading to fewer customer credited. complaints / lower costs of production / better reputation / less waste [an] Some points could be awarded as either Disadvantages: [k] or [an] but do not award the same point • Workers less motivated [k] of the 90 employees [app] so maybe more twice e.g. higher quality, efficient, fewer likely to leave the business / more errors [an] mistakes. • Workers cannot cover for absent colleagues / may be the only person who can do that task/job [k] which could mean manufacturing may stop / Some [an] can be used for different points slow down [an] but only award once. • Need to train employees [k] increasing training costs / increased cash outflows [an] More sales/customers is [an] only. • Not spread risk [k] Can award points about a business Other appropriate responses should be credited. specialising in producing a single product. 4(e) Do you think the advantages of taking over a competitor are greater than 6 This is a general question so there are no the disadvantages? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. To access evaluation must refer to both an Award up to 2 marks for relevant development of points. advantage and disadvantage. Award up to 2 marks for a justified decision as to whether the advantages of taking over a competitor are greater than the disadvantages. For evaluation to be awarded justification will usually follow on from relevant analysis Points might include: of points. Advantages: • Reduced/less competition [k] increasing sales [an] AND/OR increase Some points could be awarded as [k] or revenue [an] [an], but only award once. • Gain brand name/image of competitor / better reputation [k] leading to increasing customer loyalty [an] AND/OR more sales [an] Can accept economies and diseconomies • Economies of scale [k] leading to lower average/unit costs [an] of scale where no specific examples given. • Access new skills/expertise/resources/ideas (from other business) [k] • More capacity/output [k] leading to possible economies of scale [an] Do not award: • Answers about monopolies. Disadvantages: • Answers about forward/backward • Increased costs [k] which the business might not be able to afford [an] integration. • Possible clash of management styles [k] leading to wrong decisions being taken [an] • Could demotivate employees [k] lowering efficiency [an] • Difficult to coordinate [k] could lead to mistakes/errors [an] • Poor communication [k] which could demotivate employees [an] • Less choice for customers [k] Other appropriate responses should be credited. Justification might include: One advantage of a taking over a competitor is less competition [k] which could allow the business to increase prices [an]. However, there could be a high cost [k] which the business might not be able to afford [an]. The advantages are greater because the combination of less competition and higher prices may lead to higher revenue [eval] which may help cover the costs of the takeover [eval].