Business 9609/31 May/June 2023: question paper and mark scheme

Mark scheme

1 Analyse two benefits to WP of using quality assurance. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis Developed analysis that identifies connections between causes, impacts and/or consequences of two points. Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks Knowledge of two Application of two Limited analysis relevant points is relevant points to a Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. Application of one two points. Knowledge of one relevant point to a Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: Only reward benefits If more than two benefits are referred to, reward the best two. All annotation ( ) should be in the left margin. 1 Indicative content Responses may include: AO1 Knowledge and understanding Definition of relevant terms (max K1) Quality assurance: a system of agreeing and meeting quality standards at each stage of production. Contrast to quality control which is checking based on inspection of the product or a sample of products. Knowledge of benefits (max K2) might include: Quality standards assured Satisfied customers Motivated employees Less waste Greater competitiveness Reduced costs Problems identified during process Need for final inspection reduced or removed Easier to trace where faults occur Employees have greater responsibility for making sure their work meets standards Greater employee involvement in decision making AO2 Application Limited application, applies knowledge to WP once. Developed application, + applies knowledge to WP twice. Max one for application for the first benefit and max one for application for the second benefit. WP uses wood as key material in production. WP customers are retailers. Employees are skilled and paid a combination of a wage plus piece rate. Employees check their own work. Toys are designed well and have excellent quality – USP. Firm has grown rapidly. 1 AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. (quality standards assured) faults with products will be identified ensuring that quality standards are met which will increase customer satisfaction and this will increase repeat custom resulting in higher sales. (less waste) as employees are responsible for checking the wooden toys for faults there will be less waste of materials which will reduce costs resulting in an increase in profits. (reduced costs) employee checking of quality will reduce costs and therefore enable WP to offer more competitive prices resulting in an increase in sales and therefore profit. (motivation of employees) greater responsibility for quality may increase the motivation of employees which will lead to an increase in work effort and productivity and therefore increase output of wooden toys. Problems identified in production so costs of correcting are lower Reduced cost of final inspection so less or no quality inspectors need to be employed Fault finding easier so future costs saved increasing production efficiency Accountability for quality/errors is improved so production workers take more care and waste is reduced. Greater employee motivation and feeling of being in a team so less conflict and more efficiency. Accept all valid responses.

Mark scheme

2 Analyse two limitations to WP of its methods of internal communication. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis Developed analysis that identifies connections between causes, impacts and/or consequences of two points. Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks Knowledge of two Application of two Limited analysis relevant points is relevant points to a Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. Application of one two points. Knowledge of one relevant point to a Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: Only reward limitations. If more than two limitations are referred to, reward the best two. All annotation ( ) should be in the left margin. 2 Indicative content Responses may include: AO1 Knowledge and understanding Definition of internal communication and/or possible methods and/or reasons for internal communication (max K1) Internal communication is with employees and between managers or between departments. Methods include: meetings, reports, notice boards, memos and email. Reasons for internal communication – To tell employees what to do and what is expected. – To let employees have some input into business decision-making. – To allow coordination of activities within a business. – To give managers feedback from other employees. Limitations of internal communication used by WP (max K2) One-way communication – messages sent in one direction, from sender to receiver, with no feedback. Spoken communication can be ambiguous. When communication is with a large group some receivers may be reluctant to ask for further detail. Spoken communication might not be appropriate for complicated and technical matters. Good ideas from employees are likely to be missed. Written reports do not allow for immediate feedback. Limited communication between functional departments. Time taken in communicating information. AO2 Application Limited application, applies knowledge to WP once. Developed application, + applies knowledge to WP twice. Max one for application for the first benefit and max one for application for the second benefit. Three managers give weekly written reports and meet with the owner. The weekly meeting with employees is one-way, from the owner to the employees. Little evidence of employees being able to influence decisions. There are 35 employees. Managers meet individually with Rona each week. 2 AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. (one-way communication) With one -way communication and limited opportunity for feedback employees may be demotivated and this will result in lower productivity which will reduce output. (large group meetings) may result in limited feedback from employees which could mean that good ideas from employees are likely to be missed . This will result in opportunities for improving production to be missed and lower growth in productivity. (communication between departments) Managers meet individually with Rona reducing opportunity for inter- departmental discussion. This will slow the sharing of information between managers thus limiting coordination of departments and thus reducing the effectiveness and efficiency of decisions (time taken) Rona meets with managers individually which will waste time as she could meet with managers collectively. Individual meetings do not make an efficient use of her time and will slow decision making resulting in WP being less responsive. (time taken) Rona has a weekly meeting with production employees. She could share this information more quickly using notices or email and this would free up her time to focus on more important issues facing WP. Accept all valid responses.

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3(a) Using the data in Table 1.1, calculate the seasonal variation for 2022 Q2 (X). 2 Indicative content Responses may include: SV = Revenue in Q2 – Trend = seasonal variation (1) OR 1.5 – 1.588 (1) = –0.088 OR –88 000 (2) 0.088 OR 88 000 (1) Accept all valid responses. 3(b) Using the data in Table 1.1, calculate the forecast revenue for 2023 Q3 (Y). 2 Indicative content Responses may include: Forecast revenue = forecast trend plus average seasonal variation for that quarter (1) OR 1.755m + (–0.25) (1) = 1.505 OR 1 505 000 (2) Accept all valid responses. 3(c) Evaluate the importance to WP’s business planning of using sales forecasts based on time series analysis. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion is made in the business context. Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 3(c) Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of business planning or knowledge of time series analysis. Developed knowledge + will be demonstrated through knowledge of business planning and knowledge of the time series analysis. Knowledge of time series analysis Components of forecasting using time series analysis (TSA): moving average, trend, seasonal variations, random events. Knowledge of business planning Elements of business planning: financial forecasts, marketing mix, workforce planning and operations. AO2 Application Limited application, applies knowledge to WP once. Developed application, + applies knowledge to WP twice. Highly seasonal nature of WP sales, sales are highest in Q1 and lowest in Q3. Possible new product range of outdoor play equipment. Skilled employees will take time to recruit and train. No real competitor threat to impact sales trends. Possible effects of new government policies will impact sales trends. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. TSA is a quantitative technique and provides a more scientific approach to forecasting and is therefore useful when making decisions about how many employees are needed for production to ensure that future customer needs are met . As skilled employees are used by WP it will take time to recruit and train employees so WP needs effective workforce planning otherwise WP will not be able to meet increasing demand and this will reduce future profits . 3(c) TSA takes account of seasonal variations and is therefore relevant for planning where there is a regular fluctuation in demand . Sales prediction enables planning inventory holding which will delay cash outflows for purchasing inventory and therefore improve liquidity . AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. All forecasting may be inaccurate if external or internal environment changes. TSA very important for forecasting sales for WP as sales vary seasonally. TSA very important for planning production and inventory for WP to maximise efficiency on operations. Must be able to accurately turn forecasts into resource planning. Other forecasting methods more appropriate for other aspects of business planning e.g. – market research for new product range sales. – secondary research (reports) for possible effects of new government policies. – SWOT, blue ocean, for corporate planning. Accept all valid responses.

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4(a) Refer to Table 1.2 and lines 41-66. 4 Calculate the forecast return on capital employed (ROCE) for the year ending 31 May 2024. Indicative content Responses may include: ROCE = Profit from operations / Capital employed X 100 And/or Capital employed = issued shares + reserves + non-current liabilities (1) CE = 1 + 2 + 2 = 5 (2) ROCE = 0.2 / 1 + 2 + 2 X 100 (3) ROCE = 4% (4) OFR Alternatives 0.1 / 5 X 100 = 2% (3) [profit for the year rather than operating profit] For example 0.2 / 3 X 100 = 6.7% (3) [reserves not included in CE] 0.2 / 4 X 100 = 5% (3) [issued shares not included in CE] 4(b) Evaluate whether the financial information is sufficient for WP to decide if it should produce the new outdoor 12 product range. Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion is made in the business context. Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 4(b) Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of relevant financial information or other factors in the decision. Developed knowledge + + will be demonstrated through knowledge of relevant financial information and other factors in the decision. Definition and/or explanation of terms used: share price, capital employed, current ratio, gearing ratio, elements of income statement, borrowing and reserves. Market research methods and their advantages/disadvantages. The new range in relation to business objectives and resources. Forecasts are not certainties, there is always risk. Borrowing and reserves. AO2 Application Limited application applies knowledge to WP once. Developed application + applies knowledge to WP twice. Highly seasonal nature of WP sales. Some market research indicates probability of success. Use made of the data in the information. – Borrowing and existing cash is sufficient to finance project. – Forecast ROCE less than existing ROCE. – Gearing ratio rising (30% to 40%) – Profit forecast to decrease but still positive. – Dividends to shareholders forecast to decrease ($0.15m to $0.05m). Link decision to impact of new government policies. 4(b) AO3 Analysis Limited analysis - candidate shows one link in the chain of analysis. Developed analysis - candidate shows two or more links in the chain of analysis. Financial data indicates that the project can be financed as it appears that WP has relatively low gearing and may therefore be able to borrow the money required . The decrease in profit shown in the data suggests that in the short term the investment will not benefit WP as profit is a key business objective and this will reduce available finance for other future investments thus indicating that WP should reconsider the investment. Investment appraisal is not included and this provides a measure of the return that the investment generated which is important profit is the primary objective of business. The impact on employees of training required to use new machinery could have an impact on motivation (positive or negative) and therefore impact productivity and / or quality of existing output. The impact on existing customers due to possible disruption to production as new machinery is introduced and workers are trained. AO4 Evaluation Limited evaluation - limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation - supported judgement and/or reasonable evaluative comment. Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context. Financial information is essential as it covers the important factors including financial position of WP. If it can be shown the financial forecasts incorporate accurate market and cost information they are sufficient. The information provides a useful starting point to explore in more detail what looks like a positive addition to the product portfolio. Other information / factors are also essential. – Investment appraisal over a longer time period. – Information on workface availability and skillsets would be important. – Information on how the new range fits into the product portfolio or wider strategic planning would be useful. – Entering a new market always entails some un-measurable risk. – Critical Path Analysis to help assess impact on existing production and customers. – Is there sufficient market research to establish that WP should enter the outdoor play equipment market? 4(b) Sufficiency of financial information depends on: – To what extent would the other director/managers support the introduction of the new range? – To what extent have the forecasts taken account of the possible new government policies? – To what extent will Rona (the decision maker) rely on the Finance manager’s information? – Financial information is based on assumptions that may not be accurate, especially as we are not given the source or detail of these. – It is very likely the financial forecasts will quickly become outdated as new government policies are implemented in the next six months. – The financial data refers to only one year. Forecast data on a longer timescale is also needed. – Will the decrease in profits be permanent? Accept all valid responses.

Mark scheme

5 Evaluate the possible effects on WP if the new economic policy measures are implemented. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion is made in the business context. Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 5 Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of economic policy. Developed knowledge + + will be demonstrated through knowledge of economic policy and knowledge of link to impact on WP. Definition and/or explanation of the role of government in relation to economic policy. Definition and/or explanation of the problems: inflation, skills shortages, government borrowing requirement. Definition and/or explanation of policies: pay restrictions, income tax, monetary policy. Possible effects of these policies in relation to the problems and/or their effects on economic variables. AO2 Application Limited application, applies knowledge to WP once. Developed application, + applies knowledge to WP twice. Whether to introduce new product range of outdoor play equipment. Seasonal nature of sales, with peak at end of 6 month new policies, introduction period. Existing product ranges are indoor toys. Current market position seems secure. Employees are skilled, have training opportunities, are paid basic wage plus piece rates. Good financial position as seen in extracts from accounting statements. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Pay restrictions in the public sector may lead to workers searching for alternative work in the private sector and therefore WP may find it easier to recruit skilled workers reducing the cost of recruitment . 5 WP already offers training to its workers and so will not be affected by the new tax proposed. This could increase WP’s competitiveness as other toy manufacturers face increased tax and therefore have less profit for reinvestment. An increase in interest rates will increase borrowing costs and therefore make any investment by WP less profitable . This could delay any expansion plans that WP has . Increased income taxes will reduce household disposable income which could lead to a reduction in demand for WP’s goods and therefore decrease sales and profits. AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. Need to wait to find out precisely what the new policies will be before it is possible to assess their impact on WP. Difficult to be certain of the impact and timescale of the effects of the changes, making it likely that spending decisions will be slower or postponed. The policies will reduce consumer spending but to what extent will this affect spending on the products WP supply? Depends, for example, on income elasticity of demand (impact of increase in income tax) Only public sector workers affected by pay restrictions, WP is in the private sector so its costs won’t be directly affected. WP already offers training opportunities so new tax on companies not offering training should not impact WP. The time taken for effects of changes to operate is uncertain, making it difficult to make an immediate assessment of the likely impact on WP. Accept all valid responses.