Business Studies Redspot 2011-2019
Business Studies Redspot 2011-2019
Business Studies Redspot 2011-2019
Cambridge IGCSE®
Business Studies 0450
For examination in June and November 2020, 2021 and 2022.
Also available for examination in March 2020, 2021 and 2022 for India only.
Version 2
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Contents
Key benefits
Cambridge IGCSE® syllabuses are created especially for international students. For over 25 years, we have worked
with schools and teachers worldwide to develop syllabuses that are suitable for different countries, different types
of schools and for learners with a wide range of abilities.
Cambridge IGCSE Business Studies is accepted by universities and employers as proof of an understanding of
business concepts and techniques across a range of different types of businesses. Learners will be able to:
•• understand different forms of business organisations, the environments in which businesses operate and
business functions such as marketing, operations and finance
•• appreciate the role of people in business success.
Our programmes balance a thorough knowledge and understanding of a subject and help to develop the skills
learners need for their next steps in education or employment.
Cambridge
learner
‘The strength of Cambridge IGCSE qualifications is internationally recognised and has provided
an international pathway for our students to continue their studies around the world.’
Gary Tan, Head of Schools and CEO, Raffles International Group of Schools, Indonesia
Cambridge IGCSEs are accepted and valued by leading universities and employers around the world as evidence of
academic achievement. Many universities require a combination of Cambridge International AS & A Levels and
Cambridge IGCSEs or equivalent to meet their entry requirements.
UK NARIC, the national agency in the UK for the recognition and comparison of international qualifications and
skills, has carried out an independent benchmarking study of Cambridge IGCSE and found it to be comparable to
the standard of GCSE in the UK. This means students can be confident that their Cambridge IGCSE qualifications
are accepted as equivalent to UK GCSEs by leading universities worldwide.
‘Cambridge IGCSE is one of the most sought-after and recognised qualifications in the world. It
is very popular in Egypt because it provides the perfect preparation for success at advanced level
programmes.’
Mrs Omnia Kassabgy, Managing Director of British School in Egypt BSE
Supporting teachers
We provide a wide range of practical resources, detailed guidance, and innovative training and professional
development so that you can give your learners the best possible preparation for Cambridge IGCSE.
2 Syllabus overview
Aims
The aims describe the purposes of a course based on this syllabus.
Content overview
1 Understanding business activity
This section introduces the underlying ideas and concepts of business and includes the purpose and nature of
business activity and how businesses can be classified. Enterprise and entrepreneurs, and why some businesses
grow while others remain small are further important issues. How business size can be measured, types of
business organisation, business objectives and stakeholder objectives are the concluding topics.
3 Marketing
This section includes the role of marketing, the distinctions between niche and mass markets and the
techniques of market segmentation. The methods and importance of market research are covered. The central
role of the marketing mix, i.e. the four Ps, is made clear. Marketing strategies to influence consumer decisions
at home and in new foreign markets are the final topics in this section.
4 Operations management
The focus is the functional area of production and includes the meaning and methods of production and how
productivity can be increased. The different costs of production and break-even analysis are covered. The
section concludes with the importance and methods of achieving quality in the production process and location
decisions of businesses.
Assessment overview
All candidates take two papers.
Assessment objectives
The assessment objectives (AOs) are:
•• demonstrate knowledge and understanding of facts, terms, concepts, conventions, theories and techniques
commonly applied to or used as part of business behaviour.
AO2 Application
•• apply knowledge and understanding of facts, terms, concepts, conventions, theories and techniques.
AO3 Analysis
AO4 Evaluation
•• present reasoned explanations, develop arguments, understand implications and draw inferences
•• make judgements, recommendations and decisions.
AO2 Application 20
AO3 Analysis 25
AO4 Evaluation 15
Paper 1 Paper 2
AO2 Application 20 20
AO3 Analysis 20 30
AO4 Evaluation 10 20
3 Subject content
In all of the following, candidates are required to apply their understanding to a variety of simple business
situations. Candidates should be able to make simple decisions based upon the analysis and evaluation of
information provided.
1.3.2 The methods and problems of measuring •• Methods of measuring business size, e.g. number
business size: of people employed, value of output, capital
employed (profit is not a method of measuring
business size)
•• Limitations of methods of measuring business
size
1.3.3 Why some businesses grow and others remain •• Why the owners of a business may want to
small: expand the business
•• Different ways in which businesses can grow
•• Problems linked to business growth and how
these might be overcome
•• Why some businesses remain small
1.3.4 Why some (new or established) businesses fail: •• Causes of business failure, e.g. lack of
management skills, changes in the business
environment, liquidity problems
•• Why new businesses are at a greater risk of failing
1.5.2 The role of stakeholder groups involved in •• Main internal and external stakeholder groups
business activity: •• Objectives of different stakeholder groups
•• How these objectives might conflict with each
other, use examples
2 People in business
2.1 Motivating employees
2.1.1 The importance of a well-motivated workforce: •• Why people work and what motivation means
•• The benefits of a well-motivated workforce:
labour productivity, reduced absenteeism and
labour turnover
•• The concept of human needs, e.g. Maslow’s
hierarchy
•• Key motivational theories: Taylor and Herzberg
2.3.2 The importance of training and the methods of •• Importance of training to a business and to
training: employees
•• Benefits and limitations of induction training,
on-the-job training and off-the-job training
2.3.3 Why reducing the size of the workforce might •• Difference between dismissal and redundancy
be necessary: with examples
•• Understand situations in which downsizing the
workforce might be necessary, e.g. automation or
reduced demand for products
•• Recommend and justify which employees to
make redundant in given circumstances
2.3.4 Legal controls over employment issues and •• Legal controls over employment contracts, unfair
their impact on employers and employees: dismissal, discrimination, health and safety, legal
minimum wage
3 Marketing
3.1 Marketing, competition and the customer
3.1.1 The role of marketing: •• Identifying customer needs
•• Satisfying customer needs
•• Maintaining customer loyalty
•• Building customer relationships
3.1.3 Concepts of niche marketing and mass •• Benefits and limitations of both approaches to
marketing: marketing
3.1.4 How and why market segmentation is •• How markets can be segmented, e.g. according
undertaken: to age, socio-economic grouping, location,
gender
•• Potential benefits of segmentation to business
•• Recommend and justify an appropriate method
of segmentation in given circumstances
3.2.2 Presentation and use of market research •• Analyse market research data shown in the form
results: of graphs, charts and diagrams; draw simple
conclusions from such data
3.3.5 Technology and the marketing mix: •• Define and explain the concept of e-commerce
•• The opportunities and threats of e-commerce to
business and consumers
•• Use of the internet and social media networks for
promotion
3.4.2 The nature and impact of legal controls related •• Impact of legal controls on marketing strategy,
to marketing: e.g. misleading promotion, faulty and dangerous
goods
3.4.3 The opportunities and problems of entering •• Growth potential of new markets in other
new foreign markets: countries
•• Problems of entering foreign markets,
e.g. cultural differences and lack of knowledge
•• Benefits and limitations of methods to overcome
such problems, e.g. joint ventures, licensing
4 Operations management
4.1 Production of goods and services
4.1.1 The meaning of production: •• Managing resources effectively to produce goods
and services
•• Difference between production and productivity
•• Benefits of increasing efficiency and how to
increase it, e.g. increasing productivity by
automation and technology, improved labour
skills
•• Why businesses hold inventories
•• The concept of lean production: how to achieve
it, e.g. just-in-time inventory control and Kaizen;
benefits of lean production
4.1.2 The main methods of production: •• Features, benefits and limitations of job, batch
and flow production
•• Recommend and justify an appropriate
production method for a given situation
4.2.2 Economics and diseconomies of scale: •• The concept of economies of scale with
examples, e.g. purchasing, marketing, financial,
managerial, technical
•• The concept of diseconomies of scale with
examples, e.g. poor communication, lack of
commitment from employees, weak coordination
5.1.2 The main sources of finance: •• Internal sources and external sources with
examples
•• Short-term and long-term sources with
examples, e.g. overdraft for short-term finance
and debt or equity for long-term finance
•• Importance of alternative sources of capital,
e.g. micro-finance, crowd-funding
•• The main factors considered in making the
financial choice, e.g. size and legal form of
business, amount required, length of time,
existing loans
•• Recommend and justify appropriate source(s) of
finance in given circumstances
5.5.4 Why and how accounts are used: •• Needs of different users of accounts and ratio
analysis
•• How users of accounts and ratio results might
use information to help make decisions, e.g.
whether to lend to or invest in the business
6.1.2 How government control over the economy •• Identify government economic objectives,
affects business activity and how businesses e.g. increasing Gross Domestic Product (GDP)
may respond: •• Impact of changes in taxes and government
spending
•• Impact of changes in interest rates
•• How businesses might respond to these changes
6.3.2 Reasons for the importance and growth of •• Benefits to a business of becoming a
multinational companies (MNCs): multinational and the impact on its stakeholders
•• Potential benefits to a country and/or economy
where a MNC is located, e.g. jobs, exports,
increased choice, investment
•• Potential drawbacks to a country and/or
economy where a MNC is located, e.g. reduced
sales of local businesses, repatriation of profits
6.3.3 The impact of exchange rate changes: •• Depreciation and appreciation of an exchange
rate
•• How exchange rate changes can affect businesses
as importers and exporters of products,
e.g. prices, competitiveness, profitability
(exchange rate calculations will not be assessed)
The question paper comprises four questions requiring a mixture of short answers and structured data responses.
Each question is introduced by stimulus material. For some questions candidates will need to refer to the stimulus
material in their answers. The stimulus material may include tables, graphs and images.
Candidates should be aware of the marks for each part question. These are printed on the question paper.
Candidates should use them as a guide to the amount of detail and length of response expected and to help them
manage their time effectively.
The question paper comprises four questions based on a case study, provided as an insert with the paper. The case
study includes appendices with data presented in a variety of forms, such as tables, graphs, newspaper extracts and
advertisements.
Candidates should be aware of the marks for each part question. These are printed on the question paper.
Candidates should use them as a guide to the amount of detail and length of response expected and to help them
manage their time effectively.
Command words
The table below includes command words used in the assessment for this syllabus. The use of the command word
will relate to the subject context.
This section is an overview of other information you need to know about this syllabus. It will help to share the
administrative information with your exams officer so they know when you will need their support. Find more
information about our administrative processes at www.cambridgeinternational.org/examsofficers
Cambridge IGCSE, Cambridge IGCSE (9–1) and Cambridge O Level syllabuses are at the same level.
Making entries
Exams officers are responsible for submitting entries to Cambridge International. We encourage them to work
closely with you to make sure they enter the right number of candidates for the right combination of syllabus
components. Entry option codes and instructions for submitting entries are in the Cambridge Guide to Making
Entries. Your exams officer has a copy of this guide.
Exam administration
To keep our exams secure, we produce question papers for different areas of the world, known as ‘administrative
zones’. We allocate all Cambridge schools to one administrative zone determined by their location. Each zone has
a specific timetable. Some of our syllabuses offer candidates different assessment options. An entry option code
is used to identify the components the candidate will take relevant to the administrative zone and the available
assessment options.
Retakes
Candidates can retake the whole qualification as many times as they want to. This is a linear qualification so
candidates cannot re-sit individual components.
The standard assessment arrangements may present unnecessary barriers for candidates with disabilities or learning
difficulties. We can put arrangements in place for these candidates to enable them to access the assessments and
receive recognition of their attainment. We do not agree access arrangements if they give candidates an unfair
advantage over others or if they compromise the standards being assessed.
Candidates who cannot access the assessment of any component may be able to receive an award based on the
parts of the assessment they have completed.
Language
This syllabus and the related assessment materials are available in English only.
A* is the highest and G is the lowest. ‘Ungraded’ means that the candidate’s performance did not meet the
standard required for grade G. ‘Ungraded’ is reported on the statement of results but not on the certificate. In
specific circumstances your candidates may see one of the following letters on their statement of results:
•• Q (result pending)
•• X (no result)
•• Y (to be issued)
These letters do not appear on the certificate.
Grade descriptions
Grade descriptions are provided to give an indication of the standards of achievement candidates awarded
particular grades are likely to show. Weakness in one aspect of the examination may be balanced by a better
performance in some other aspect.
Grade descriptions for Cambridge IGCSE Business Studies will be published after the first assessment of the IGCSE
in 2020. Find more information at www.cambridgeinternational.org/igcse
Changes to syllabus content •• The information on page 19, Section 5.5 Analysis of accounts has been
updated. The heading in 5.5.1 now reads ‘Profitability’.
•• The syllabus content has been reworded for clarity and to provide
further guidance to teachers.
•• The syllabus content has been represented in a two-column format to
make it clearer.
•• The international accounting terminology has been updated. Balance
sheet has been replaced with statement of financial position.
•• A list of command words has been added to the syllabus.
Changes to assessment •• The assessment objective (AO) weightings have been reviewed and
(including changes to specimen updated in response to feedback from teachers.
papers) •• The AO descriptors have not changed.
•• Specimen Paper 1 has been updated to include ‘define’ as a command
word.
•• The specimen mark scheme for the part (b) questions in Paper 2 has
been updated so the AO2 application marks are integrated into the
levels of response marking grid.
•• Question paper titles have been updated.
Paper 1: Short Answer and Data Response
Paper 2: Case Study
Regulation •• From 2020 this syllabus will no longer be regulated by the
qualifications and examination regulators in England, Wales and
Northern Ireland.
•• Changes to the syllabus and specimen papers reflect the change in
regulated status.
Significant changes to the syllabus are indicated by black vertical lines either side of the text.
In addition to reading the syllabus, teachers should refer to the updated specimen assessment materials.
The syllabus and specimen papers use our new name, Cambridge Assessment International Education.
You are strongly advised to read the whole syllabus before planning your teaching programme.
Any textbooks endorsed to support the syllabus for examination from 2015 or 2020 are suitable for
use with this syllabus.
INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use a calculator.
INFORMATION
● The total mark for this paper is 80.
● The number of marks for each question or part question is shown in brackets [ ].
1 UDig is a large mining company based in country B. UDig is in the private sector. It supplies
businesses in country B with 30% of the coal they need and the rest is imported.
UDig now has eight mines but plans to close two of them. This will threaten 1800 employees with
redundancy. The Managing Director said: ‘I blame the appreciation of country B’s exchange rate
and new legal controls, including those to protect the environment. The Government should help
private sector businesses.’
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(c) Outline how the appreciation of country B’s exchange rate might affect UDig.
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(d) Explain two factors UDig should consider when deciding which mines to close.
Factor 1: ...................................................................................................................................
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Explanation: ..............................................................................................................................
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Factor 2: ...................................................................................................................................
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(e) Do you think government should help private sector businesses? Justify your answer.
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2 Izaak owns a small fish restaurant. He employs two chefs (cooks) and three workers who serve in
the restaurant.
Izaak has been trying to increase added value to improve profits. Izaak has been looking at the
financial performance of his business. An extract is shown in Table 2.1. Izaak has received a
number of complaints about food and service. He knows he must improve quality but cannot
decide on the best way to do this.
Table 2.1
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X ...............................................................................................................................................
Y .......................................................................................................................................... [2]
Way 1: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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Way 2: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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(d) Explain two problems that low quality might cause Izaak’s business.
Problem 1: ................................................................................................................................
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Explanation: ..............................................................................................................................
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Problem 2: ................................................................................................................................
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Explanation: ...............................................................................................................................
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(e) Do you think the profitability of Izaak’s fish restaurant has improved since last year? Justify
your answer using appropriate ratios.
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3 ReBag is a social enterprise. ReBag employs 30 people in four small towns in different parts of the
country. They work from home and make a range of bags from pieces of old fabric (cloth).
Asha started the business three years ago using micro-finance. Last year ReBag’s revenue was
$700. Asha said: ‘Our external stakeholders want ReBag to employ people in five more towns.
Getting a bank loan to expand the business will be a problem. What will I do about management?
How will I inform workers about possible expansion?’
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Function 1: ................................................................................................................................
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Function 2: ................................................................................................................................
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(d) Explain two possible reasons why it might be difficult for ReBag to get a bank loan.
Reason 1: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
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(e) Explain two possible methods of internal communication that a small business could use to
inform workers about a possible expansion. Justify which method should be chosen.
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4 GBU is a public limited company. It makes a range of beauty products including shampoo and
soaps for the mass market.
Last year GBU’s revenue fell. The Marketing Director has been looking at some results from its
primary market research. It was based on a sample of 2000 people, see Fig. 4.1. She believes
maintaining customer loyalty is more important than attracting new customers.
Fig. 4.1
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(b) Calculate the percentage (%) of people who buy beauty products online. Show your working.
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(c) Identify four methods of primary market research that a business could use.
Method 1: ..................................................................................................................................
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Advantage 1: ............................................................................................................................
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Explanation: ..............................................................................................................................
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(e) Do you think maintaining customer loyalty should be more important to a business than
attracting new customers? Justify your answer.
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BLANK PAGE
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reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
Specimen
These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the
question
• the standard of response required by a candidate as exemplified by the standardisation
scripts.
GENERIC MARKING PRINCIPLE 2:
Marks awarded are always whole marks (not half marks, or other fractions).
GENERIC MARKING PRINCIPLE 3:
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when
these features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.
GENERIC MARKING PRINCIPLE 4:
Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
GENERIC MARKING PRINCIPLE 5:
Marks should be awarded using the full range of marks defined in the mark scheme for the
question (however; the use of the full mark range may be limited according to the quality of the
candidate responses seen).
GENERIC MARKING PRINCIPLE 6:
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.
Price × Quantity sold. (2) Income of the business (1) from the sale of goods or
services. (1)
2(b) Calculate the values of X and Y. 2
Business with social objectives (1) and not just aiming to make a profit. (1)
• coordinate
• control
• organise
• planning
• command.
• Government
• Suppliers
• Local community
• Customers
• Lenders/banks
• Pressure groups.
Meeting (1)
• So able to see reactions to ideas/comments. (1)
• Will increase costs for travel. (1)
• Will take people away from work. (1)
Four from:
• focus groups/consumer panels
• (postal) questionnaires
• online survey
• interviews
• observations.
4(d) Explain two advantages to GBU of using shops as a channel of 6
distribution.
Customer loyalty:
• Spread word/free advertising (1) as existing customers might recommend
product to others. (1)
• Keep reputation (1) leading to a competitive advantage. (1)
• Able to match products to existing customer needs (1) so they know what
to produce. (1)
New customers:
• Widen target market (1) as 80% like their products. (1)
• Customer tastes change (1) so may be cheaper to find new customers
rather than develop existing products. (1)
BLANK PAGE
INFORMATION
● This insert contains the case study.
● You may annotate this insert and use the blank spaces for planning. Do not write your answers on the
insert.
Bethany owns The BB Health Spa in Main City in country X. Economic growth has been high for the
last few years. The government of country X wants this growth to continue so it has reduced income
tax. However, it is also worried about inflation becoming a problem so it has increased interest rates.
The BB Health Spa is very busy and Bethany is considering taking on a partner to help manage the
business and give her more free time. However, she has been a sole trader for 10 years and wants the
business to stay small.
The customers of The BB Health Spa are people of all ages who are interested in their health. Bethany
employs two qualified workers to provide the treatments for customers. Bethany herself also provides
customers with treatments. In addition, she does all the administration such as ordering inventory,
accounts and paying invoices when the spa is closed.
The BB Health Spa still uses the original treatment equipment which was purchased when the business
started. Some spas nearby have the latest equipment but these spas charge much higher prices than
The BB Health Spa. Bethany records all the financial transactions by filling in accounts books by hand.
This takes her a long time. Customers book appointments using the telephone and Bethany later
telephones them to remind them when an appointment is due.
Appendix 1
Appendix 2
Appendix 3
New equipment now available in many health spas to make skin look younger
There have been a number of changes in technology for health spas which allow the treatments to be
much more effective in making skin look younger. Many people are keen to try these treatments using
the latest equipment to get younger looking skin. This equipment is very expensive for health spas to
buy or lease.
The news of these treatments has appeared on social media sites and on mobile phone Apps leading
to higher demand. ‘Some customers will pay high prices for such treatments’, said a local health spa
owner who is keen to promote his health spa as being one of the first to use the new equipment.
There have also been developments in software which make customer bookings and accounts much
easier, quicker and with fewer mistakes. Automatic text (sms) messages are used to remind customers
of their appointments – so no need to miss an appointment again.
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reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use a calculator.
INFORMATION
● The total mark for this paper is 80.
● The number of marks for each question or part question is shown in brackets [ ].
● The insert contains the case study.
1 (a) Explain two possible reasons why Bethany wants the business to remain small.
Reason 1: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
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Explanation: ..............................................................................................................................
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(b) Explain why the following three factors are important to Bethany when choosing a business
partner:
• knowledge of new technology
• experience in managing a health spa
• capital to invest.
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Conclusion: ...............................................................................................................................
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2 (a) Explain two reasons why it is important to Bethany to identify changes in customer
preferences.
Reason 1: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
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Explanation: ..............................................................................................................................
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(b) State the advantages and disadvantages of the following three ways to achieve good quality
service at the health spa:
• only employ highly trained workers
• record all customer complaints
• buy only the best quality materials to use in the health spa.
Which do you think is the most important way? Justify your answer.
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Buy only the best quality materials to use in the health spa: ....................................................
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Conclusion: ...............................................................................................................................
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3 (a) Explain four reasons why effective communication between the owner and employees in a
business is important.
Reason 1: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 3: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 4: .................................................................................................................................
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Explanation: ..............................................................................................................................
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(b) Consider the weekly forecasts in Appendix 2 for the two additional services Bethany could
choose:
• hair cuts
• steam room.
Which additional service should Bethany choose to offer? Justify your answer.
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Recommendation: ....................................................................................................................
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© UCLES 2017 0450/02/SP/20 [Turn over
8
4 (a) Explain four ways the new technology identified in Appendix 3 could help Bethany improve
her business.
Way 1: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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Way 2: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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Way 3: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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Way 4: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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(b) Explain how the following two changes are likely to affect The BB Health Spa:
• lower income tax in country X
• increase in interest rates in country X.
Which change is likely to have the most effect on profit? Justify your answer.
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Conclusion: ...............................................................................................................................
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BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
Specimen
These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the
question
• the standard of response required by a candidate as exemplified by the standardisation
scripts.
GENERIC MARKING PRINCIPLE 2:
Marks awarded are always whole marks (not half marks, or other fractions).
GENERIC MARKING PRINCIPLE 3:
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when
these features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.
GENERIC MARKING PRINCIPLE 4:
Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
GENERIC MARKING PRINCIPLE 5:
Marks should be awarded using the full range of marks defined in the mark scheme for the
question (however; the use of the full mark range may be limited according to the quality of the
candidate responses seen).
GENERIC MARKING PRINCIPLE 6:
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.
For example:
To stay as her own boss (1) as Bethany has run the business successfully
for 10 years (1) and she does not want anyone telling her what to do or
disagreeing with her decisions. (1) The business idea is all her own and so
she does not want any conflict which might cause important decisions to be
delayed giving problems for the business. (1)
Well-justified conclusion/recommendation.
For example:
To meet customer needs (1) as Bethany wants to run the business
successfully to make a profit (1) and she needs to offer the services her
clients want otherwise she will lose customers to competitors. (1) She will
need to know if certain treatments are wanted and if she doesn’t offer them
at the moment she will need to learn how to provide them in order to retain
existing customers. (1)
Which do you think is the most important way? Justify your answer.
Well-justified conclusion/recommendation.
Advantages Disadvantages
Only employ • Ensures customer • Highly trained staff
highly trained satisfaction with expect higher wages.
workers treatments. • May find it difficult to
• Treatments carried out recruit new staff.
correctly.
Record all • Identify problems with • Takes time to do this.
customer treatments and try to • Not all clients will tell
complaints correct them. you when they are
• Clients know Bethany not happy with their
cares about their treatments.
treatments being
carried out correctly.
Only buy the • Helps establish an • High price for
best quality image of high quality treatments may deter
materials to treatments. potential customers.
use in the • Ensures good results of • High quality image may
health spa treatments. put some customers off,
i.e. exclusivity.
Conclusion • The best materials will not give the best results if
performed by poorly trained staff.
• Recording customer complaints will not ensure
problems do not persist if poor quality materials are
used.
• Highly trained staff may still make mistakes and
complaints need to be monitored to ensure all
customers are happy and mistakes are avoided in the
future.
For example:
To ensure mistakes are not made by employees (1) as employees may not
have much experience and only know how to carry out a few tasks therefore
they need to be told what to do. (1)
Well-justified conclusion/recommendation.
For example:
Improve communication with customers (1) as they can be reminded of
appointments by using the automated text (sms) service that sends a
message of the date and time of the treatment. (1)
© UCLES 2017 Page 11 of 14
0450/02 Cambridge IGCSE – Mark Scheme For examination
SPECIMEN from 2020
Which change is likely to have the most effect on profit? Justify your
answer.
Well-justified conclusion/recommendation.
BLANK PAGE
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
DC (NF/SW) 36795/3
© UCLES 2011 [Turn over
2
1 Carlos was made redundant from his job in a factory. He used his redundancy money and For
some of his savings to start a new business. He bought a boat to give trips to tourists on Examiner’s
a river near his home. The boat cost him $150 000. Table 1 shows the revenue and cost Use
Table 1
Carlos wanted his business to give him job security and to give a return on his investment of
at least 20% each year. He estimates that annual profits will be $37 500.
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(b) Identify two examples of overhead costs that Carlos might incur.
Example 1: .......................................................................................................................
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Example 2: .......................................................................................................................
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(c) Using the information given in Table 1, draw a break-even chart for Carlos’ business.
$
2500
2000
1500
Revenue Weekly
& Costs Break-Even
1000 Chart
500
0
0 10 20 30
Number of boat trips per week
[4]
© UCLES 2011 0450/11/O/N/11
3
(d) Identify and explain three methods that Carlos could use to promote his new business. For
Examiner’s
Method 1: ......................................................................................................................... Use
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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(e) Carlos wanted his business to give him job security and a return on capital of at least
20%. Do you think that his business will help him achieve these objectives? Justify your
answer.
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2 Early Tots makes wooden toys for children. The business uses both primary and secondary For
market research data to decide what products to make. It has a wide range of toys but some Examiner’s
of the products are nearing the end of their product life cycle. The managers are thinking Use
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(c) Identify and explain two methods that Early Tots could use to gather primary market
research data.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three extension strategies that Early Tots could use. For
Examiner’s
Strategy 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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Strategy 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Strategy 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Consider the advantages and disadvantages of two channels of distribution that Early
Tots could use for a new range of wooden toys. Recommend which channel Early Tots
should use. Justify your answer.
Channel 1: .......................................................................................................................
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Channel 2: .......................................................................................................................
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Recommendation: ............................................................................................................
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3 Crompton Springs, a private limited company, bottles mineral water. The production method For
is automated but inefficient, because the machinery used was bought 20 years ago. The Examiner’s
company uses unskilled and low paid workers to load and unload the production lines. The Use
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Feature 1: .........................................................................................................................
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Feature 2: .........................................................................................................................
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(c) Identify and explain two possible reasons why workers at Crompton Springs are low
paid.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three problems that inefficiency can cause a business. For
Examiner’s
Problem 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that the employees at Crompton Springs will be happy with the managers’
decision to invest in new machinery? Justify your answer.
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4 XYZ is a large retail business with over 50 shops. The business is going to open a new shop For
and wants to recruit a manager. A job description for the new position of shop manager Examiner’s
has been produced. The directors are also looking at the methods they use to pay their Use
employees.
Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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(b) Identify two suitable places to advertise the position of a new shop manager.
Place 1: ............................................................................................................................
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Place 2: ............................................................................................................................
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(c) Identify and explain two advantages to XYZ of producing a job description for the
position of shop manager.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three different payment methods that XYZ could use to reward their For
employees. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that the appointment of a suitable shop manager will mean that the new
shop is certain to be successful? Justify your answer.
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5 Country W has a mixed economy. The public sector has grown in recent years. The For
Government has also introduced many new laws regulating business behaviour and Examiner’s
protecting employees and consumers. Use
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(b) Identify two objectives often set by businesses in the public sector.
Objective 1: ......................................................................................................................
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Objective 2: ......................................................................................................................
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(c) Identify and explain two reasons why the size of the public sector might increase over
time.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three ways in which consumers might benefit from consumer For
protection laws. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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(e) The management of many businesses in the private sector think that employment
legislation is making them less competitive. Do you agree? Justify your answer.
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BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2011 question papers for most
IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – October/November 2011 0450 11
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme.
In such cases, professional judgement should be exercised in assessing the merits of the
answer.
Examples of possible answers may also be included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Means that his job position has gone and hence he is no longer required [2].
Simple idea like loses job [1] or job has gone [1].
Both idea of loss of employment and the loss of the job position needed for [2].
A development of an idea such as losing his job but giving financial compensation can also
gain full marks.
(b) Identify two examples of overhead costs that Carlos might incur. [2]
(c) Using the information given in Table 1, draw a break-even chart for Carlos’ business.
[4]
Answer: 25 trips generates a total revenue of $2000. Total costs are $1250.
Break-even is at 10 trips.
The 4 marks are awarded as follows:
Accurate plot of TR [1].
Accurate plot of TC [2]. This is allocated by starting at $500 [1], gradient determined by
variable cost [1].
Correct labelling of TR and TC lines (both) [1]. This mark CAN be awarded even if plots are
not accurate to scale.
(d) Identify and explain three methods that Carlos could use to promote his business. [6]
Three methods of advertising, if clearly in context, are accepted as separate points, such as
advertising in tourist offices/advertising in tourist magazines.
Showing how the methods work and so help promote the business [3]: ‘They work by
increasing awareness and the attractiveness of the business and so encourage sales.’
(e) Carlos wanted his business to give him job security and a return on capital of at least
20%. Do you think that his business will help him achieve these objectives? Justify
your answer. [6]
Evaluation [2]:
This implies forming a judgement on the likelihood of achieving and maintaining objectives
[2].
If only one objective has been considered, maximum mark = 4 (1k + 2an + 1ev).
Information about the market, customer needs and competition already available and
collected by other agencies [2].
Simple idea such as information already collected [1]. If focus is purely on market research of
any kind, e.g. information about the market or finding out what people want, [1].
Example: called desk research [0].
The term ‘product life cycle’ means changes in the level or pattern of sales of a product over
time [2].
Two marks can be gained by two different routes:
• reference to time and level of sales [2]
• simple answer like sales change supported by correct statement of the product stages
[2]. E.g.: Shows how sales rise and eventually fall. It covers the period from launch
through to decline [2].
Changes in level of sales [1]. A list of the stages alone [1]. Sales [0].
(c) Identify and explain two methods that Early Tots could use to gather primary market
research data. [4]
Quota sampling and random sampling are rewardable only once. They are two different
methods of sampling, NOT two methods of primary data collection.
Knowledge of methods [2].
Explaining how they operate and hence gather data [2].
The explanation marks can be given for either showing how the method actually collects data
or describing the features of the methods.
(d) Identify and explain three extension strategies that Early Tots could use. [6]
Do NOT accept adverts UNLESS specifically linked to the extension strategies listed above.
So an answer that said more advertising or lower prices does NOT gain credit.
Knowledge [3], analysis/application [3].
(e) Consider the advantages and disadvantages of two channels of distribution that Early
Tots could use for a new range of wooden toys. Recommend which channel Early Tots
should use. Justify your answer. [6]
A channel of distribution refers to the means by which a product is passed from its place of
production to the final customer.
Analysis of consequences of options [2]. The consequences of using different channels can
probably be analysed against the following:
• level of exposure
• cost
• middleman margins
• final selling price
• practical issues such as stockholding.
Implies a system of production where machinery and technology carry out the work and few
if any people are directly employed [2].
Answer like ‘doesn’t use much labour’ [1].
(c) Identify and explain two possible reasons why workers at Crompton Springs are low
paid. [4]
(d) Identify and explain three problems that inefficiency can cause a business. [6]
Inefficiency implies poor use of resources. The consequences of this are likely to be:
• higher unit costs
• waste of time and resources
• unable to supply on time
• quality defects.
Identification of problem [3]. Analysis of points means showing why they create problems [3].
E.g. ‘Higher unit costs lead to a loss of competitiveness and hence lower sales.’
(e) Do you think that the employees at Crompton Springs will be happy with the
managers’ decision to invest in new machinery? Justify your answer. [6]
(b) Identify two suitable places to advertise the position of a new shop manager. [2]
(c) Identify and explain two advantages to XYZ of producing a job description for the
position of shop manager. [4]
(d) Identify and explain three different payment methods that XYZ could use to reward
their employees. [6]
Knowledge [3]. The methods of paying employees are usually considered as follows:
• time rates
• performance-based
• bonus for exceeding targets (incentive payments)
• commission based on results
• rewards based on the demands of the job, e.g. salary or wages
• profit-sharing
• share ownership.
Answer must be contextualised so do not accept piece rates since XYZ is a shop.
Do not accept fringe benefits.
Analysis/application [3]. The analysis shows how the system operates. No consideration
needed as to its implications etc.
(e) Do you think that the appointment of a suitable shop manager will mean that the new
shop is certain to be successful? Justify your answer. [6]
Identification of issues [2]. A manager plays a crucial role in determining success. They:
• set standards
• control activities
• manage staff
• set targets.
However, success will not occur if:
• the shop is in the ‘wrong’ place
• its products are not required by customers
• competition is very high.
Analysis of impact of suitable manager on success [2].
Evaluative judgement showing awareness of other relevant factors [2].
Businesses that are owned and run by both the state and individuals [2].
OR an economy that has both a private and public sector [2].
OR an economy where resources are allocated by both individuals (or the market) and the
government [2].
A simple answer like ‘not all businesses are owned by the state’ [1] or ‘not all are owned by
individuals’ [1], i.e. NOT specified who the other owners are.
(b) Identify two objectives often set by businesses in the public sector. [2]
(c) Identify and explain two reasons why the size of the public sector might increase over
time. [4]
(d) Identify and explain three ways in which consumers might benefit from consumer
protection laws. [6]
Knowledge [3]. Consumers benefit in a number of ways. They are protected against:
• substandard products
• misleading selling methods
• excessive prices
• lack of legal redress.
Analysis showing why these benefits occur or how consumers are protected [3].
For example, a consumer sold a good by misleading selling has something which they might
not want and would not have bought if they had been properly informed. They can gain
compensation for this, which clearly represents a benefit to them.
Do NOT credit knowledge of specific laws or acts as such. So an answer that said ‘trades
description act’ would not gain a mark. However, the answer might go on to say that this act
prevents goods from being wrongly described [1k], which stops the consumer from being
misled [1an].
(e) The management of many businesses in the private sector think that employment
legislation is making them less competitive. Do you agree? Justify your answer. [6]
Analysis of issues [2]. This involves showing how the points identified affect the
competitiveness of the business. For example, the business’s costs may increase and this
would make them less competitive. However, if the staff feel well looked after then their
performance might be better and productivity would increase. So competitiveness might be
improved.
Evaluation of issues [2]. A judgement based upon the analysis resulting in a conclusion. A
one-sided answer is acceptable for full marks.
DC (LEO/DJ) 32721/3
© UCLES 2011 [Turn over
2
Everyday Suits
Simon owns a business called Everyday Suits. It is a private limited company. The business makes
suits for men using batch production. The production workers are paid an hourly wage. They have no
fringe benefits, as Simon believes the workers should be happy that they have a job. Simon employs
100 production workers who work on the production of suits. He has 5 employees who help him in
the office. There is only one manager who is responsible for Finance. Simon carries out all the other
management functions for the business.
The business has grown quickly and profits have also increased rapidly over the last two years. To
finance the rapid growth of the business Simon has taken out a large bank loan for $15 000 which is
being repaid over 5 years.
Simon wants to continue to expand the business. He wants to increase the range of suits to add to his
current range of medium priced suits. There is a lot of competition for medium priced suits and this
market segment is not growing. He has identified two other market segments for suits, both of which
have increasing demand. However, he is unsure which market segment option to choose.
Option 1:
Start selling expensive suits that are hand made and of high quality material. These suits would be
made to measure for each customer and individually designed. The market for these suits is a niche
market. He would need to employ more skilled workers.
Option 2:
Start selling low priced suits to the mass market. However, to enter this market Simon will need to
invest in machinery to produce suits on a large scale. He could gain from economies of scale which
would be an advantage.
Appendix 1
2011 2010
Fixed Assets
Equipment 20 000 20 000
Current Assets
Stock 10 000 5 000
Debtors 30 000 10 000
Cash at Bank 0 5 000
Total 40 000 20 000
Current Liabilities
Creditors 10 000 20 000
Overdraft 20 000 0
Total 30 000 20 000
Financed by:
Share capital 10 000 10 000
Profit and loss reserves 5 000 10 000
Bank loan 15 000 0
Capital employed 30 000 20 000
Appendix 2
Simon
? ? ? ? Finance
Appendix 3
LE LE
SA SA
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
DC (LEO) 32719/3
© UCLES 2011 [Turn over
2
1 (a) Simon wants to motivate his production workers to work harder. Identify two methods he For
could use to motivate production workers at Everyday Suits. Explain why these methods Examiner’s
would be effective. Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [8]
(b) Appendix 2 shows the proposed new organisation chart for Everyday Suits. Simon will For
not be able to do all the work himself if the business grows bigger. Examiner’s
Use
Choose four departments that Simon could create and justify why each department
could be important to the success of the business.
Department 1: ..................................................................................................................
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Department 2: ..................................................................................................................
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Department 3: ..................................................................................................................
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Department 4: ..................................................................................................................
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.................................................................................................................................... [12]
2 (a) Refer to Appendix 3. Identify and explain two ways Simon could increase the added For
value of his current business. Examiner’s
Use
Explanation: .....................................................................................................................
..........................................................................................................................................
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Explanation: .....................................................................................................................
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...................................................................................................................................... [8]
(b) To expand the business Simon may need new machinery. To finance this, he is For
considering using an overdraft or leasing the equipment or selling more shares. Consider Examiner’s
these three options for raising finance and recommend which one he should choose. Use
Justify your choice.
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Recommendation: ............................................................................................................
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.................................................................................................................................... [12]
© UCLES 2011 0450/21/O/N/11 [Turn over
6
3 (a) As Everyday Suits expands it will need to employ new managers. Identify and explain For
four parts of an induction training programme for new managers. Examiner’s
Use
1. ......................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
2. ......................................................................................................................................
Explanation: .....................................................................................................................
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3. ......................................................................................................................................
Explanation: .....................................................................................................................
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4. ......................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) Simon thinks that Option 1 would require a different marketing mix to Option 2. In what For
ways do you think each of the elements of the marketing mix will be different for Option Examiner’s
1 and Option 2? Justify your answer. Use
Product: ...........................................................................................................................
..........................................................................................................................................
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Price: ................................................................................................................................
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Promotion: .......................................................................................................................
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Place: ...............................................................................................................................
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.................................................................................................................................... [12]
4 (a) As Everyday Suits expands it could gain from economies of scale. Identify and explain For
two examples of economies of scale the business might benefit from as it expands. Examiner’s
Use
Example 1: .......................................................................................................................
Explanation: .....................................................................................................................
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Example 2: .......................................................................................................................
Explanation: .....................................................................................................................
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...................................................................................................................................... [8]
(b) Using the information in Appendix 1, do you think Simon should be satisfied with the For
financial position of the business? Justify your answer using appropriate ratios. Examiner’s
Use
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5 (a) Everyday Suits currently uses batch production. However, if Simon chooses Option 1 For
job production will be used or if he follows Option 2 flow production will be used. Explain Examiner’s
the main features of job production for Option 1 and the main features of flow production Use
for Option 2.
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(b) Simon will need to use new machinery in the production of suits if he chooses Option 2. For
Do you think that the production workers at Everyday Suits would think the use of new Examiner’s
machinery was a good idea or not? Justify your answer. Use
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BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2011 question papers for most
IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – October/November 2011 0450 21
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) Simon wants to motivate his production workers to work harder. Identify two methods
he could use to motivate production workers at Everyday Suits. Explain why these
methods would be effective. [8]
Content:
Increased wages; bonus; use piece-rate; fringe benefits; training; job rotation/enrichment;
non-financial benefits.
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis – the methods must be appropriate for
production workers.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
suits (any reference to any aspect of suits reward once only); batch production; 100
production workers; profits increased as grown quickly; continue to expand the business;
employ skilled workers; invest in new machinery; information from Appendix 3; private
limited company.
There may be other examples in context which have not been included here.
Simple explanation: Introduce piece-rate to pay production workers as this will encourage
them to work harder as the more suits they make the more they will get paid. (1 additional
mark for simple explanation)
Developed explanation: Introduce piece-rate to pay production workers as this will encourage
them to work harder as the more suits they make the more they will get paid. This will mean
that the workers’ pay will increase if they make more suits and they will feel that their efforts
are being rewarded. (1 further explanation mark for a developed explanation)
Application: The application mark could be achieved as the answer refers to suits.
(1 application mark)
Appendix 2 shows the proposed new organisation chart for Everyday Suits. Simon will not be
able to do all the work himself if the business grows bigger.
(b) Choose four departments that Simon could create and justify why each department
could be important to the success of the business. [12]
Content:
Marketing/Market Research; Human Resources; Sales; Purchasing; Production/Operations;
Administration; IT; R&D.
Level 1 The marketing department is needed. 1 mark for each suitable functional area.
Level 2 E.g. The marketing department is needed to carry out market research into the
styles of suits which customers like the most. This will enable the company to
produce suits which should meet customer demand and sell well. It is vitally
important that the company makes a product which meets customer needs or the
business may lose profit or even make a loss.
6 marks for a good level 2 answer plus 1 application mark for mentioning the style of
suits they should sell.
5 marks for the first level 2 answer plus 1–2 marks for each additional level 2
answer. I.e. two level two answers = 6 marks; 3 level 2 answers = 7 marks; 4 level 2
answers = 8 marks. However, if the level 2 answer is very well explained then 6
marks can be awarded for the first level 2 answer. If the second level 2 answer is
also very well explained then 8 marks in total can be awarded. 6 × L2 = 10 marks.
suits (any reference to any aspect of suits reward once only); private limited company;
batch production; 100 production workers; 5 office workers; profits increased as grown
quickly; a lot of competition; employ skilled workers; invest in new machinery; information
from Appendix 3.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Level 2 2 marks 5–10 marks
Well applied to the case. At Good discussion of the role of the functional
least two examples of area would gain one L2 and then good
reference to, or use of, the judgement shown as to why the functional area
case. is important to the business a second L2 can be
awarded.
Level 1 1 mark 1–4 marks
Limited application to the Suitable functional area listed/stated. Limited
case. At least one example of judgement shown as to why functional area is
reference to, or use of, the needed.
case.
2 (a) Refer to Appendix 3. Identify and explain two ways Simon could increase the added
value of his current business. [8]
Content:
Increase price; decrease input costs; adding features to suits; exclusive brand name/logo;
recognisable packaging.
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis.
1 knowledge mark + up to 2 explanation marks + 1 application mark for each factor (4 marks
× 2 ways).
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
suits (any reference to any aspect of suits reward once only); batch production; 100
production workers; a lot of competition; employ skilled workers; invest in new machinery;
information from Appendix 3, e.g. cloth/fabric.
There may be other examples in context which have not been included here.
Reason: They could reduce the cost of the cloth purchased for making the suits.
(1 knowledge mark)
Simple explanation: They could reduce the cost of the cloth purchased for making the suits.
This will reduce the input costs and increase the difference between the input costs and
price. (1 additional mark for simple explanation)
Developed explanation: They could reduce the cost of the cloth purchased for making the
suits. This will reduce the input costs and increase the difference between the input costs
and price. Simon could find a cheaper supplier or negotiate a lower price from cloth suppliers
to increase the added value. (1 further explanation mark for a developed explanation)
Application: The application mark could be achieved as the answer refers to cloth to make
suits. (1 application mark)
(b) To expand the business Simon may need new machinery. To finance this, he is
considering using an overdraft or leasing the equipment or selling more shares.
Consider these three options for raising finance and recommend which one he should
choose. Justify your choice. [12]
Content:
Overdraft – quickly arranged; flexible; can be expensive; repayable on demand; high interest
rates; only borrow small amount.
Lease – capital not needed; payments spread out over time; updates possible; asset not
owned; maintenance/repairs covered.
Selling more shares – don’t have to be repaid; no interest paid; may lose some control;
profits shared; takes time to arrange.
Level 1 E.g. They could sell more shares and so they would not need to pay any interest on
the loan.
1 mark for each statement.
Level 2 E.g. They could sell more shares and so they would not need to pay any interest on
the loan. The money would be used to buy the new equipment so that an increasing
number of suits would be produced. The money would not have to be repaid and so
it would not add to the debt of the company. Not paying any interest means that the
business would have less money to pay out and should improve the cash flow of the
business. However, there would be more shareholders and they would expect
dividends paid out of the profits.
6 marks for a good level 2 answer plus 1 application mark for mentioning the
production of suits.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer. I.e. two level two answers = 6 marks; 3 level 2 answers
= 7 marks; 4 level 2 answers = 8 marks. However, if the level 2 answer is very well
explained then 6 marks can be awarded for the first level 2 answer. If the second
level 2 answer is also very well explained then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least three level 2 answers which consider which option to
choose and justify why it is better than the other two sources. E.g. level 2 answer +
selling more shares will be better than an overdraft because the business will not be
able to borrow very much money using an overdraft and it is repayable on demand.
It is also better than leasing because the business will still need to pay more than
the purchase price of the equipment when leasing and so selling more shares will be
the cheapest option for the company.
suits (any reference to any aspect of suits reward once only); private limited company;
batch production; 100 production workers; profits increased as grown quickly; bank loan of
$15 000; continue to expand the business; financial information from Appendix 1.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Level 3 9–10 marks
At least 3 options explained at Level 2 + good
judgement shown as to which source of finance
to choose and why it is better than the other two
sources.
Level 2 2 marks 5–8 marks
Well applied to the case. At Good discussion of the advantage/disadvantage
least two examples of of any of the sources of finance listed. Or
reference to, or use of, the balanced argument (even if listed). Some
case. judgement shown about which one they should
choose in recommendation.
Level 1 1 mark 1–4 marks
Limited application to the Advantage/disadvantage of any of the sources
case. At least one example of of finance listed.
reference to, or use of, the
case.
3 (a) As Everyday Suits expands it will need to employ new managers. Identify and explain
four parts of an induction training programme for new managers. [8]
Content:
Shown round the business/facilities; introduce colleagues; go over the contract; shown to
work area; outline the job; history of company; fire drill; safety procedures/safety equipment;
aims/objectives of the business.
The marks available for this question are as follows: 4 marks for knowledge and 4 marks for
explanation.
1 knowledge mark + 1 explanation mark for each example (4 × 2 marks for each item).
E.g. The new manager would be introduced to new colleagues (1 knowledge mark) so that
they will feel more comfortable starting to work having met the other employees they will be
managing. (1 explanation mark)
(b) Simon thinks that Option 1 would require a different marketing mix to Option 2. In
what ways do you think each of the elements of the marketing mix will be different for
Option 1 and Option 2? Justify your answer. [12]
Content:
Product – individual suits for Option 1 but mass-produced product for Option 2.
Price – premium pricing for Option 1 and competitive pricing for Option 2.
Place – Option 1 sold through specialist shops while Option 2 sold through chain stores.
Promotion – newspapers aimed at high income groups for Option 1 but popular newspapers
for Option 2.
NB the answers must focus on marketing and not production and cost.
Level 1 E.g. The product is different – for Option 1 it is an individual product but for Option 2
it is a mass-produced product. 1 mark for each statement.
Level 2 E.g. The product is different – for Option 1 it is an individual product but for Option 2
it is a mass-produced product. Option 1 requires the suits to be made to measure for
each individual customer and the suit will be unique to each customer. However,
Option 2 will have to be standard size suits made of standard cloth. There will be a
restricted range of sizes and fabrics/colours to choose from. The cloth for Option 1
will be of better quality than Option 2.
5 marks for the first level 2 answer plus 1–2 marks for each additional level 2
answer. I.e. two level two answers = 6 marks; 3 level 2 answers = 7 marks; 4 level 2
answers = 8 marks; 6 level 2 marks = 10 marks. However, if the level 2 answer is
very well explained then 6 marks can be awarded for the first level 2 answer. If the
second level 2 answer is also very well explained then 8 marks in total can be
awarded.
suits (any reference to any aspect of suits reward once only; a lot of competition;
information from Appendix 3; niche market.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Level 2 2 marks 5–10 marks
Well applied to the case. At Comparisons/contrast made (even if listed) to
least two examples of show why the marketing mix will be different for
reference to, or use of, the the two options for each of the elements of the
case. marketing mix would gain one L2. For
justification or further development of the
differences, award a second L2.
Level 1 1 mark 1–4 marks
Limited application to the Elements of the marketing mix listed/stated for
case. At least one example of each option.
reference to, or use of, the
case.
4 (a) As Everyday Suits expands it could gain from economies of scale. Identify and explain
two examples of economies of scale the business might benefit from as it expands. [8]
Content:
Financial; marketing; technical; risk-bearing; managerial; bulk buying/purchasing.
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
suits (any reference to any aspect of suits reward once only); material/fabric; buttons;
thread; one finance manager; invest in new machinery.
There may be other examples in context which have not been included here.
Economy of scale: The business could gain financial economies of scale. (1 knowledge mark)
Simple explanation: The business could gain financial economies of scale because it has
expanded and is now larger and banks will see it as being more likely to pay the money back
and therefore less risk. (1 additional mark for simple explanation)
Developed explanation: The business could gain financial economies of scale because it has
expanded and is now a larger company, so banks will see it as being more likely to pay the
money back and therefore less risk. Less risk will mean that the interest rates will be lower to
reflect the lower risk. (1 further explanation mark for a developed explanation)
Application: The application mark could be achieved as the answer refers to expanding to
become a larger company. (1 application mark)
(b) Using the information in Appendix 1, do you think Simon should be satisfied with the
financial position of the business? Justify your answer using appropriate ratios. [12]
Content:
Level 1 – straight repetition of data in Appendix 1 no credit.
No cash in 2011 and overdrawn (L1).
Debtors increased in 2011 (L1).
Creditors decreased in 2011 (L1).
Level 2
Current ratio – 1:1 (L2) and 1:1.33 (L2).
Acid test 1:0.75 (L2) and 1:1 (L2).
Gearing ratio = 50%.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer. I.e. two level 2 answers = 6 marks; 3 level 2 answers = 7 marks; 4 level 2
answers = 8 marks. However, if the level 2 calculation is explained then 6 marks can
be awarded for the first level 2 answer. If the second level 2 calculation is also
explained then 8 marks in total can be awarded.
Level 3 This will include at least two calculations with comments on the figures and
judgement explained as to whether the business is in a strong financial position or
not.
Knowledge/Analysis/Evaluation
Level 3 9–12 marks
At least two L2 calculations and/or ratios. Decision made and justified on the
calculations as to whether or not the financial position of the business is good.
Level 2 5–8 marks
Financial information calculated and/or ratios calculated on the liquidity of the
business.
Level 1 1–4 marks
Basic statements about financial situations/limited judgement shown.
5 (a) Everyday Suits currently uses batch production. However, if Simon chooses Option 1
job production will be used or if he follows Option 2 flow production will be used.
Explain the main features of job production for Option 1 and the main features of flow
production for Option 2. [8]
Content:
Job production – products are made to the specific design of the customer; often labour-
intensive; highly skilled workers; high quality/individual product.
Flow production – uses machinery; production line used; low-skilled workers; standardised
product; continuous production; large quantity produced.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
suits (any reference to any aspect of suits reward once only); 100 production workers; paid
hourly; continue to expand the business; material/cloth; invest in new machinery;
information from Appendix 3.
There may be other examples in context which have not been included here.
Job/flow production: Job production will mean the suit is made to the individual design of the
customer. (1 knowledge mark)
Simple explanation: Job production will mean the suit is made to the individual design of the
customer and so will meet the customer’s needs. It may be made by just one worker who
does all the processes themselves. (1 additional mark for simple explanation)
Developed explanation: Job production will mean the suit is made to the individual design of
the customer and so will meet the customer’s needs. It may be made by just one worker who
does all the processes themselves. The worker will need to be skilled so that they can carry
out all the different processes involved in making the suit, such as cutting out and sewing
together the fabric. (1 further explanation mark for a developed explanation)
Application: The application mark could be achieved as the answer refers to cutting out and
sewing the suits together. (1 application mark)
(b) Simon will need to use new machinery in the production of suits if he chooses
Option 2. Do you think that the production workers at Everyday Suits would think the
use of new machinery was a good idea or not? Justify your answer. [12]
Content:
Advantages of new machinery – increased skills required; higher wages; makes the job
easier; business more competitive so jobs more secure; job can be done quickly; training.
Disadvantages of new machinery – jobs lost; sometimes job more boring; worried about
future security of jobs; difficult to adjust to new machinery; resistant to change; reduce skills;
maybe lower wage rate.
NB the answer should be related to the workers’ view, not the managers’ view.
Level 1 E.g. Increased skills will be required from employees. 1 mark for each statement.
Level 2 E.g. Increased skills will be required from employees and this will mean employees
will be trained by the company to operate the new machinery and so they should
make more suits and their wages will increase.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer. I.e. two level two answers = 6 marks; 3 level 2 answers = 7 marks; 4 level 2
answers = 8 marks. However, if the level 2 answer is very well explained then 6
marks can be awarded for the first level 2 answer. If the second level 2 answer is
also very well explained then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least three level 2 answers plus consideration of whether
employees will think it’s a good idea or not.
suits (any reference to any aspect of suits reward once only); batch production; 100
production workers; paid hourly; no fringe benefits; continue to expand the business;
employ skilled workers; information from Appendix 3.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Level 3 9–10 marks
3 × Level 2 + justified conclusion of whether
employees will think it’s a good idea or not.
Level 2 2 marks 5–8 marks
Well applied to the case. At Advantages and disadvantages of new
least two examples of technology discussed or balanced view (even if
reference to, or use of, the listed).
case.
Level 1 1 mark 1–4 marks
Limited application to the Advantages/disadvantages of new technology
case. At least one example of listed.
reference to, or use of, the
case.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
DC (SM/CGW) 36366/2
© UCLES 2011 [Turn over
2
1 Autobrake is a business that manufactures brake systems for cars. Fig. 1 shows its market For
share in 2005 and 2010. The market for brake systems was worth $70m in 2010. It is likely Examiner’s
to become an increasingly competitive market. Autobrake’s management believe that the Use
2010 = Autobrake
0 20 40 60 80 100
% market share
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(c) Autobrake uses flow production in its factories. Identify and explain two benefits of using
flow production.
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
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Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three possible reasons why Autobrake’s market share changed For
between 2005 and 2010. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that investing in a wider range of products will mean that the business will
become more profitable in the future? Justify your answer.
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2 The economy of country A is in recession. To deal with the problems caused by the recession, For
the Government has cut interest rates and reduced taxes. These changes have had a big Examiner’s
impact on businesses in country A. The Government has also introduced laws to protect Use
employees at work. Some people have suggested that the Government should give grants
and subsidies to private sector businesses to help them survive.
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Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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(c) Identify and explain two consequences of a fall in interest rates on businesses in
country A.
Consequence 1: ...............................................................................................................
Explanation: .....................................................................................................................
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Consequence 2: ...............................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three ways by which employees can be protected at work by For
Government laws. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
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Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that Governments should give financial support to private sector
businesses to survive in a recession? Justify your answer.
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3 Sarah set up a business as a sole trader running a nursery for small children too young For
to go to school. The business is successful and has opened a number of new nurseries. Examiner’s
Sarah took on a business partner in 2007. Growth has continued and now the business has Use
10 nurseries in different towns and villages. Sarah is planning to open another nursery and is
looking for a suitable location.
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(b) A nursery school is classified as a tertiary sector activity. Identify two other examples of
businesses that are also in the tertiary sector.
Example 1: .......................................................................................................................
(c) Identify and explain two advantages to Sarah of having a business partner.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three factors Sarah should consider when choosing a suitable For
location for a new nursery. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think that it would be a good idea for Sarah to continue to expand her business?
Justify your answer.
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4 Trucker is a public limited company that makes products such as tractors and construction For
vehicles. Table 1 gives selected information from its Balance Sheet for the last two years. Examiner’s
Use
$m
2009 2010
Financed by:
Long term Liabilities 200 220
Shareholders’ Funds 60 85
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Example 1: .......................................................................................................................
(c) Identify and explain two reasons why a business might have creditors.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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© UCLES 2011 0450/11/M/J/11
9
(d) Identify and explain three possible reasons why Trucker’s net assets increased in 2010. For
Examiner’s
Reason 1: ........................................................................................................................ Use
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) Can the success of Trucker’s business be assessed just by analysing its Balance Sheet?
Justify your answer.
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5 Fig. 2 shows the organisational structure of ABC, a business that manufactures toys. For
As the business has grown, the management has found it difficult to maintain good internal Examiner’s
communication and to control activities. ABC always recruits its senior managers from within Use
the company.
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...................................................................................................................................... [2]
(b) Identify two features of the organisational structure of ABC as shown in Fig. 2.
Feature 1: .........................................................................................................................
(c) Identify and explain two reasons why managers may be reluctant to delegate tasks to
employees in their organisation.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three advantages to ABC of recruiting senior managers from within For
the business. Examiner’s
Use
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 3: ....................................................................................................................
Explanation: .....................................................................................................................
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Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – May/June 2011 0450 11
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
(c) Autobrake uses flow production in its factories. Identify and explain two benefits of
using flow production. [4]
Knowledge [2 x 1]:
• larger output/mass production
• economies of scale or lower unit costs
• overheads spread over many units
• intensive use of machinery
• productivity rises
• continuous process
• standardised products/consistent quality
• specialisation/unskilled workers.
Do not accept ‘quicker’, ‘cheaper’ or ‘quality’ alone as knowledge points. These can be used
as part of an explanation.
(d) Identify and explain three possible reasons why Autobrake’s market share changed
between 2005 and 2010. [6]
Remember Autobrake’s market share has fallen. Total market demand for the product has
not fallen.
Knowledge [3 x 1]:
• product range dated
• new rivals entered market
• incorrect pricing
• quality issues damaged reputation
• marketing strategies ineffective.
Analysis [3 x 1]: explain how the factor identified results in a relative fall in sales. E.g. If
product range is old-fashioned [k] this results in consumers turning to other businesses to
better meet their needs [an].
(e) Do you think that investing in a wider range of products will mean that the business
will become more profitable in the future? Justify your answer. [6]
Knowledge [2]:
• attracts new groups of customers
• increases attractions of business to existing customers
• enhances the image of the company
• spreading risk
• costs will rise
• diseconomies of scale.
Analysis [2]: explanation of how the knowledge point identified affects the business.
Evaluation [2]: justified decision related to profitability based on points identified.
(b) Identify two ways in which consumers might be affected by a recession. [2]
Knowledge [2 x 1]:
• Lack of confidence/less spending
• lower income/loss of income/job losses/falling living standards
• reduced choice
(c) Identify and explain two consequences of a fall in interest rates on businesses in
country A. [4]
Knowledge [2 x 1]:
• cost of borrowing reduced
• potential incentive to increase investment
• increase in spending by consumers
• interest earned on savings falls
Analysis [2 x 1]: explanation shows how the business will be affected. E.g. Increase in
spending by consumers [1] leading to rise in sales [1]. Loans are cheaper so businesses take
more loans [1].
(d) Identify and explain three ways by which employees can be protected at work by
Government laws. [6]
Knowledge [3 x 1]:
• unfair dismissal
• employment contract
• protection against exploitation/discrimination
• health and safety
• wage protection
• maximum hours.
(e) Do you think that Governments should give financial support to private sector
businesses to survive in a recession? Justify your answer. [6]
(b) Identify two other examples of businesses that are also in the tertiary sector. [2]
(c) Identify and explain two advantages to Sarah of have a business partner. [2]
Knowledge [2 x 1]:
• injection of more capital
• sharing of work load
• new ideas
• greater range of expertise/specialisation.
(d) Identify and explain three factors Sarah should consider when choosing a suitable
location for a new nursery. [6]
Knowledge [3 x 1]:
• cost related issues [rent/rates/government grants]
• market factors/near housing estates or population
• competition
• transport
• security
• utilities/power/water
• access to qualified staff/labour.
Must be appropriate for a nursery.
(e) Do you think that it would be a good idea for Sarah to continue to expand her
business? Justify your answer. [6]
Knowledge [2]:
• gain economies of scale
• greater recognition
• profitability
• loss of control
• risk
• objectives of the owner
• increased cost
• revenue
• more customers.
Analysis [2]: explanation of points must be related to Sarah or her business for credit.
Evaluation [2]: justified decision related to growth based on points identified. For 2
evaluation marks must relate to Sarah or her business.
• debtors
• stock e.g. tractors/construction vehicles
• cash/bank.
1 mark per example [2 x 1].
(c) Identify and explain two reasons why a business might have creditors. [2]
Knowledge [2 x 1]:
• helps with cash flow/short-term funding
• purchase of raw materials/stock to resell
• interest-free source of finance
• standard way of carrying out business transactions
• taken an overdraft.
(d) Identify and explain three possible reasons why Trucker’s net assets increased in
2010. [6]
Analysis [3 x 1]: explanation showing possible reason for the change identified.
E.g. fixed assets are higher [k] because they bought new plant or buildings [an].
(e) Can the success of Trucker’s business be assessed just by analysing its Balance
Sheet? Justify your answer. [6]
Knowledge [2]:
Knowledge of a Balance Sheet/ways to measure success [2].
• the assets and liabilities of a business [1] at a point in time [+1]
• a financial statement at a point in time [1]
• what a business owns and owes [1]
• the value of a company [1].
Analysis [2]: interpretation of what a balance sheet does or does not show.
Evaluation [2]: justified decision related to success based on points identified.
Process of exchanging information between one group and another inside a business [2].
Flow of messages from source to recipient [1] within a business [1].
Do not accept examples of communication – the question requires a definition.
(b) Identify two features of the organisational structure of ABC as shown in Fig. 2. [2]
(c) Identify and explain two reasons why managers may be reluctant to delegate tasks to
employees in their organisation. [4]
Knowledge [2 x 1]:
• may lack confidence in employees
• want to maintain total control/manager feels threatened
• think they know best/know the task will be done/fear of errors
• employees lack training/skills
• managers not capable of explaining the task.
Analysis [2 x 1]: explanation shows why these reasons result in a lack of delegation.
(d) Identify and explain three advantages to ABC of recruiting senior managers from
within the business. [6]
Knowledge [3 x 1]:
• acts as a motivator for employees
• individual knows the business
• business knows the individual
• avoids costs of external recruitment.
Do not accept ‘time’ or ‘money’ unless explained. Training must clearly be related to
induction to be rewarded. ‘Experienced’ is not a valid answer.
Knowledge [2]:
Could include:
• telephone/cell phone
• email
• meetings/video-conferencing
• shorten span of control
• delayering.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
DC (SM/CGW) 36369/1
© UCLES 2011 [Turn over
2
1 Terfil Enterprises organises special events such as concerts and music festivals. The founder, For
Ceri Terfil, converted the business into a private limited company in 2004. ‘We are in a niche Examiner’s
market’ said Ceri ‘and have built a reputation for efficiency and low prices. I would like the Use
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(b) Identify two objectives that Ceri might have had for his business when he started it.
Objective 1: ......................................................................................................................
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Objective 2: ......................................................................................................................
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(c) Identify and explain two advantages to Ceri of converting the business to a private
limited company.
Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three potential problems to Terfil Enterprises of continuing to grow For
in the future. Examiner’s
Use
Problem 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
Explanation: .....................................................................................................................
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(e) How important are low prices in determining the long term success of Terfil Enterprises?
Justify your answer.
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2 Telefax is a business that manufactures a range of electronic products. Table 1 shows For
selected information from its latest Balance Sheet. Examiner’s
Use
$m
2009 2010
Fixed Assets 30 40
Current Assets 16 24
Current Liabilities 16 20
Net Assets 30 44
Financed by:
Long term Liabilities 10 20
Shareholders’ Funds 20 24
Capital Employed 30 44
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Example 1: .......................................................................................................................
(c) Identify and explain two reasons why most businesses have debtors.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three reasons why Telefax’s bank manager might want to see the For
accounts of the business. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Explanation: .....................................................................................................................
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(e) Do you think that the financial position of Telefax has improved in 2010? Justify your
answer.
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3 Kemptown Fried Chicken is a chain of fast food restaurants. The business is unsuccessful For
because it is badly managed. There is no organisational structure. Job tasks and roles are Examiner’s
unclear. The workers are demotivated and low paid. Communication in the business is poor Use
and meetings are rarely held because the management think they are ‘a non-productive use
of time’.
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Advantage 1: ....................................................................................................................
Explanation: .....................................................................................................................
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Advantage 2: ....................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three reasons why meetings between managers and workers can For
benefit the business. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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Explanation: .....................................................................................................................
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4 Delwar makes car tyres. The business is located in country Z. At present, all its sales are to For
customers in country Z. Delwar is the market leader in this country. Fig. 1 gives data regarding Examiner’s
its market share. The total value of car tyre sales in country Z in 2010 was $50m. This market Use
is no longer growing. The Managing Director of Delwar thinks that exporting tyres is the way
forward. There will be both costs and benefits of exporting tyres.
% market share
100
80
60
40 = other companies
20 = Delwar
2005 2010
year
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(c) Identify and explain two possible reasons why the market for car tyres in country Z is no
longer growing.
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three methods Delwar could use to increase its market share in For
country Z. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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(e) Do you think Delwar’s profits would increase if the business were to export its tyres?
Justify your answer.
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...................................................................................................................................... [6]
5 Extracto is a multinational mining business. It has recently found mineral deposits in For
country X. The Managing Director hopes that the deposits found are large enough for them Examiner’s
to make a good profit. Some pressure groups in country X think that Extracto has only Use
considered the financial benefits of its plans and has ignored the social costs.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two examples of social costs that extraction of minerals might create.
Example 1: .......................................................................................................................
..........................................................................................................................................
Example 2: .......................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two ways in which pressure groups could influence Extracto’s
decisions.
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [4]
(d) Identify and explain three factors that Extracto should consider before deciding whether For
to begin mining in country X. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
(e) Governments often aim to attract multinational companies into their countries. Do you
think that they should do this? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – May/June 2011 0450 12
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
For 2 marks must have reference to idea of ‘small part of market’ and ‘specialised’.
Niche market is a specialised sub-part of a larger market with specific characteristics [2].
Some understanding [1] e.g. small part of a market [1].
Do not accept ‘small market’ [0].
(b) Identify two objectives that Ceri might have had for his business when he started it. [2]
(c) Identify and explain two advantages to Ceri of converting the business to a private
limited company. [4]
Knowledge [2 × 1]:
• separate legal identity from owner
• limited liability
• increases ability to raise funds/sell shares (to friends and family).
Analysis [2 × 1]: explanation must show why the point creates an advantage to Ceri e.g.
limited liability [k] so owner only loses amount invested in company [an].
(d) Identify and explain three potential problems to Terfil Enterprises of continuing to
grow in the future. [6]
Knowledge [3 × 1]:
• business becomes more complex to manage/diseconomies of scale
• may lose focus on niche market/lose contact with customers
• growth limited by size of market
• lack of capital to finance growth
• new geographical market
• increase in expenditure/cost.
Do not accept more competition alone as knowledge point. It must be developed in reference
to a niche market.
Do not accept cash flow problem as it is a short-term issue.
Application/analysis [3 × 1]: explains how it might be a problem for the business e.g. Ceri
begins to find it much more difficult to manage the business [k], and starts to make
mistakes/poor decisions [an].
(e) How important are low prices in determining the long-term success of Terfil
Enterprises? Justify your answer. [6]
Analysis of factors [2]: explain how or why the factor might be an issue.
Evaluation [2]: justified decision related to long-term success based on points raised.
Assets that are owned by a business [1] and are held for a period of time (usually in excess
of a year) [2].
Some understanding [1] e.g. ‘things that are owned’.
Some understanding plus example e.g. buildings can gain 2 marks.
Do not credit example on its own.
Knowledge [2 × 1]:
• overdraft
• creditors/payables
• accruals
• outstanding tax
• short-term loans.
One mark per example [2 × 1].
(c) Identify and explain two reasons why most businesses have debtors. [4]
Knowledge [2 × 1]:
• debtors can be used as a marketing device
• standard practice in the industry
• customers don't pay/can't pay.
Analysis [2 × 1]: explanation must show why the factors identified occur e.g. marketing
device [k] can encourage customers to buy more goods as they are able to pay later [an].
(d) Identify and explain three reasons why Telefax’s bank manager might want to see the
accounts of the business. [6]
Knowledge [3 × 1]:
• can be used to assess financial strength/assess risk
• profitability
• liquidity
• gearing.
Do not accept answers which refer to how the business would use the accounts.
Analysis [3 × 1]: explanation must focus on the reason why the information that can be
learned from the accounts actually would be of interest to the bank manager.
E.g. check cash flow before giving loan [k] to make sure business can pay back [an].
(e) Do you think that the financial position of Telefax has improved in 2010? Justify your
answer. [6]
Evaluation [2]: justified decision related to whether financial position has improved.
Clear understanding of term [2] e.g. refers to level of management and division of
responsibilities within an organisation/shows the roles of people in an organisation and the
relationship between them.
Some understanding [1] e.g. ‘how a business is organised’.
A one-mark answer will refer only to communication or the concept of ‘poor’, e.g. message is
not getting through [1].
(c) Identify and explain two advantages of delegating tasks in an organisation. [4]
Knowledge [2 × 1]:
• work-load spread more evenly
• give responsibility to lower rank employees
• management can focus on more important matters
• motivational factor for employees
• improved efficiency.
Note: advantages can be for employee, manager or business.
Do not accept ‘faster’ and ‘effective’ alone as knowledge points. These can be used as part
of an explanation.
Analysis [2 × 1]: show how or why the point identified creates an advantage e.g. gives
responsibility to lower rank employees [k] which may increase motivation and job satisfaction
[an].
(d) Identify and explain three reasons why meetings between managers and workers can
benefit the business. [6]
Knowledge [3 × 1]:
Benefits might include:
• interchange of ideas
• better understanding of other people’s points of view/opinions
• improves communications
• increases sense of unity of purpose and motivation
• better decision-making
• problem-solving.
(e) How effective is money in motivating workers? Justify your answer. [6]
Analysis of issues [2]: explain how money may or may not motivate workers.
Clear understanding [2] e.g. business with largest percentage of total sales revenue/share of
the market [in terms of sales, revenue or output] or biggest share of market.
Some understanding [1] e.g. largest business in market/big market share/business with a
monopoly.
(c) Identify and explain two possible reasons why the market for car tyres in country Z is
no longer growing. [4]
Knowledge [2 × 1]:
• recession
• market saturated/demand for cars static or falling
• increased use of public transport/environmental concerns
• increase in price of cars/fuel/tyres
• better quality product
Note: answers must refer to total market for tyres in country Z and not just Delwar.
Application/analysis [2 × 1]: explanation to show how or why the factor affects the market
for tyres, e.g. in a recession [k] people likely to have less money and buy fewer cars/tyres
[an].
(d) Identify and explain three methods Delwar could use to increase its market share in
country Z. [6]
Knowledge [3 × 1]:
• improved quality of products
• widened product range
• bought out rivals/takeover/merge
• promotion/advertising
• pricing
• improved customer service
• more sales outlets.
Analysis/application [3 × 1]: explains how method helps increase market share e.g. short-
term price promotion [k] to encourage more customers to buy more products as they are
cheaper [an].
(e) Do you think Delwar’s profits would increase if the business were to export its tyres?
Justify your answer. [6]
Knowledge [2]:
Points could include:
• advantages and disadvantages of exporting
• factors affecting profitability
• government influences
• exchange rates
• productive capacity
• access to new market/customers.
Evaluation [2]: justified decision related to Delwar's profit based on points raised, e.g.
exporting could increase sales [k] and assuming positive margins this should increase profits
[an]. The current domestic market is static and hence if no exports then sales might well fall
in future [an]. However exporting incurs costs [k]. If the process is unsuccessful then the
extra income may not cover these [an]. So potentially exporting should increase profits but
this is not inevitable [e].
Clear understanding [2]: e.g. monetary benefit [1], internal to the business [+1], profit
business makes [2].
Some understanding [1]: e.g. a benefit received by a business [1] or money benefit e.g.
profit/money/cost saving, but no indication as to the recipient [1].
(b) Identify two examples of social costs that extraction of minerals might create. [2]
Knowledge [2 × 1]:
Environmental/visual pollution/destruction of an area/noise/depletion of resources.
(c) Identify and explain two ways in which pressure groups could influence Extracto’s
decisions. [4]
Knowledge [2 × 1]:
Points might include:
• creating negative publicity/publish information
• demonstrations/protests/rally opposition against the company
• highlight the social costs of the activities/make complaints
• lobby politicians/company etc
• boycott products
• law suits.
Analysis [2]: explain how the action might influence the decisions of the business.
Arrange boycott [k] of products could mean lower sales thus lower sales revenue might
cause business to rethink [an].
(d) Identify and explain three factors that Extracto should consider before deciding
whether to begin mining in country X. [6]
Knowledge [3 × 1]:
• government rules/financial incentives/approval to proceed
• specific costs associated with given site
• infrastructure
• availability of suitable workforce
• external economies of scale
• financial viability.
Note: factors must be appropriate for a mining company.
Analysis of importance [3 × 1]: explain how and why factor needs to be considered,
e.g. a transport network will be necessary [k] to get equipment into the site and products out
easily [an].
(e) Governments often aim to attract multinational companies into their countries. Do you
think that they should do this? Justify your answer. [6]
Analysis of issues [2]: explain how or why the issue affects government decisions.
Evaluation of issues [2]: justified decision related to whether government should try to attract
multinationals. E.g. multinationals help develop skills and expertise [k], by investing money in
training the local workforce [k]. This would increase employment opportunities and spending
power within the local economy [an]. However they can lead to exploitation and lack of
respect for local customs and cultures and lead to flow of profits out of a country. So issue is
not clear-cut [e].
DC (SM/DJ) 31366/3
© UCLES 2011 [Turn over
2
Chocolate Delight
Chocolate Delight was set up in country X 15 years ago as a private limited company. The business
grew slowly as the owners used reinvested profits as the only source of finance for expansion.
The company has issued share capital of $6m. The shares are owned by six members of the Sharif
family.
A big problem for the company is that it does not have the money to build an extra factory, which is
needed to expand production. The owners are thinking of selling more shares to raise the necessary
finance. $5m is required to build the factory and equip it with production machinery. The Managing
Director says: ‘We need to become a public limited company to raise the additional finance’. However,
the Finance Director says: ‘This is a very expensive and risky way to raise the finance. We should
continue to use retained profits to pay for an additional factory, even if we have to wait for 2 to 3 years
before we have enough retained profit’.
Chocolate Delight employs skilled workers in the Research and Development (R & D) department.
This department develops new products for the company.
Chocolate Delight buys ‘Fair Trade’ cocoa. This is where the cocoa farmer receives a higher price,
about 10% more than the usual selling price. In return the farmer must ensure that no children are
working on the farms and that farm employees are paid at least a set minimum wage. The farms need
to be inspected regularly to be allowed to say they are selling ‘Fair Trade’ products.
Appendix 1
The products of Chocolate Delight and stages of the Product Life Cycle
Sales
Revenue
Appendix 2
% 6
5
economic growth
4
inflation
3
2
unemployment
1
0
2012 2013 2014 2015
Time
Appendix 3
Machine A Machine B
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
DC (SM) 31365/3
© UCLES 2011 [Turn over
2
1 (a) The Directors of Chocolate Delight think the business is successful. For
Identify and explain four ways they could use to measure the success of the business. Examiner’s
Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 4: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [8]
(b) The Directors of Chocolate Delight want to build a new factory and will need to raise For
$5m. Do you think the Managing Director is right in suggesting Chocolate Delight should Examiner’s
become a public limited company, or is the Finance Manager right in suggesting retained Use
profit should be used? Justify your answer using information in the case.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
2 (a) Appendix 1 shows plain chocolate bars are in the decline stage of the product life cycle. For
Identify and explain four ways in which the Directors of Chocolate Delight might respond Examiner’s
to this problem. Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 4: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [8]
(b) The Managing Director believes that the Sales Department is more important for the For
success of the company than the Production, Research and Development (R & D) and Examiner’s
Human Resources Departments. Do you agree with him? Justify your answer. Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
.................................................................................................................................... [12]
3 (a) Chocolate Delight has a website which gives customers information about the products For
it sells. Identify and explain two other ways that Chocolate Delight could use the Internet Examiner’s
for business purposes. Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) Appendix 3 gives information on two machines that the owners of Chocolate Delight For
could buy. Compare these two machines and recommend which machine they should Examiner’s
buy. Justify your answer using calculations of output per worker and labour costs per Use
chocolate bar.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
4 (a) The Finance Director says that break-even charts are useful when analysing the For
different products that Chocolate Delight produce. Identify and explain two ways Examiner’s
break-even charts can be useful to the Finance Director of Chocolate Delight. Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) After buying the new machinery, Chocolate Delight will need to train workers how to use it. For
Do you think that on-the-job training will be better than off-the-job training for Chocolate Examiner’s
Delight? Justify your answer by considering both the business and the employees of Use
Chocolate Delight.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
5 (a) Identify and explain two possible reasons Chocolate Delight buys its cocoa from For
Fair Trade cocoa farmers. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) Consider how the economic forecasts shown in Appendix 2 might affect the sales, costs For
and profits of Chocolate Delight over the next few years. Do you think these economic Examiner’s
trends will be good or bad for the company? Justify your answer. Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Inflation: ...........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Unemployment: ................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Conclusion: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – May/June 2011 0450 21
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) The Directors of Chocolate Delight think the business is successful. Identify and
explain four ways they could use to measure the success of the business. [8]
Content:
Profits; market share; expansion; sales; high share price; dividends paid; good reputation;
high quality products; worker satisfaction; efficiency; cash flow; financial ratios – net profit
margin, gross profit margin, ROCE, current ratio, acid test ratio.
1 mark for each way identified plus 1 explanation mark for how each way shows success.
(b) The Directors of Chocolate Delight want to build a new factory and will need to raise
$5m. Do you think the Managing Director is right in suggesting Chocolate Delight
should become a public limited company, or is the Finance Manager right in
suggesting retained profit should be used? Justify your answer using information in
the case. [12]
Content:
Advantages of becoming a plc – raise large amounts of capital; no restriction on
buying/selling shares; high status.
Disadvantages of retained profit – lower dividends to shareholders; takes time to build up.
Level 1 E.g. Becoming a plc will raise a lot of capital through the selling of shares. 1 mark
for each statement.
Level 2 E.g. Becoming a plc will raise a lot of capital through the selling of shares. A plc can
sell shares to the public and so a larger amount of money can be raised than just by
issuing shares as a private limited company, as they can only sell shares to family
and friends. However, the cost of becoming a plc is expensive as a plc has to
produce a prospectus.
5 marks for level 2 answer.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer. I.e. two level 2 answers = 6 marks; three level 2 answers = 7 marks; four
level 2 answers = 8 marks. However, if the level 2 answer is very well explained
then 6 marks can be awarded for the first level 2 answer. If the second level 2
answer is also very well explained then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least two level 3 answers and then a conclusion at the end
which justifies which is the best way compared with the other way.
Possible application marks: expansion, private limited company, family business, set up for
15 years, limited finance/additional finance, share capital $6m, retained profit for two to
three years, six shareholders, production machinery, reference to product life cycle.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
2 (a) Appendix 1 shows plain chocolate bars are in the decline stage of the product life
cycle. Identify and explain four ways in which the Directors of Chocolate Delight might
respond to this problem. [8]
Content:
Stop selling plain chocolate bars; increase advertising; methods of promotion; sell into new
markets; make small changes to the chocolate bar design; introduce a new version of the
chocolate bar; sell through different outlets; reduce price of plain chocolate bars.
(b) The Managing Director believes that the Sales Department is more important for the
success of the company than the Production, Research and Development (R & D) and
Human Resources Departments. Do you agree with him? Justify your answer. [12]
Content:
Sales – sells the products to customer; deals with retail outlets.
Production – oversees the making of the product; quality control/assurance.
R & D – to develop new products; to produce a range of products; to diversify the range of
products produced.
HR – recruits and selects new employees; organises training; industrial relations; wages and
salaries; Health & Safety; redundancy.
Level 1 E.g. It carries out research and develops new products. 1 mark for each statement.
Level 2 E.g. It carries out research into new types of chocolate bars etc. so that as the plain
chocolate bars reach the decline stage of the product life cycle there are new
products to replace them. Without the Sales Department no chocolate bars would
be sold so this department is essential to the business and its success. 5 marks for
level 2 answer plus 1 application mark for mentioning chocolate bars.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer. I.e. two level 2 answers = 6 marks; three level 2 answers = 7 marks; four
level 2 answers = 8 marks.
However, if the level 2 answer is very well explained then 6 marks can be awarded
for the first level 2 answer. If the second level 2 answer is also very well explained
then 8 marks in total can be awarded.
Possible application marks: chocolate bars, boxes of chocolates, sweets, skilled workers,
production machinery, product life cycle.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Level 2 2 marks 5–10 marks
Well applied to the case. At Explanation about Product Development,
least two examples of Sales, Production and/or HR departments.
reference to, or use of, the Judgement shown about why these are
case. important to the success of the business.
NB 9 marks only if good linkage shown
between departments.
10 marks if answer also justifies whether
Sales is the most important department.
Level 1 1 mark 1–4 marks
Limited application to the Statements about Product Development,
case. At least one example Sales, Production and/or HR departments.
of reference to, or use of,
the case.
3 (a) Chocolate Delight has a website which gives customers information about the
products it sells. Identify and explain two other ways that Chocolate Delight could use
the Internet for business purposes. [8]
Content:
To compare competitors’ products and prices; to buy raw materials; to contact suppliers and
get quotations; to email customers; to use online banking; promotions; advertising.
1 mark for each way identified (2 marks max). Up to 2 further marks are available for
explaining how the Internet will be useful.
2 application marks are also available.
1 knowledge mark + up to 2 explanation marks + 1 application mark for each way (4 marks x
2 ways).
Simple explanation: The owners of Chocolate Delight can check on competitors’ products
and the prices they charge. (1 mark for knowledge)
Developed explanation: The owners of Chocolate Delight can check on competitors’ products
and the prices they charge (1). By knowing what competitors are charging, they can keep
their own prices competitive (2). This will mean that they retain their customers and do not
lose business and therefore do not lose sales of chocolate bars but may make less profit (3).
Application: The application mark could be achieved as the answer makes reference to sales
of chocolate bars. (1 application mark)
(b) Appendix 3 gives information on two machines that the owners of Chocolate Delight
could buy. Compare these two machines and recommend which machine they should
buy. Justify your answer using calculations of output per worker and labour costs per
chocolate bar. [12]
Content:
Machine A Machine B
Machine A: output per worker = 10 000/10 = 1000 chocolate bars per worker (L2)
labour costs per chocolate bar = $100/1000 = 10c ($0.10) per chocolate bar (L2)
Machine B: output per worker = 6000/3 = 2000 chocolate bars per worker (L2)
labour costs per chocolate bar = $100/2000 = 5c ($0.05) per chocolate bar (L2)
NB: $1000 labour costs is L1 but 1000 chocolate bars per worker is L2.
Level 1 E.g. Machine A is less expensive than machine B. 1 mark for each statement.
Level 2 E.g. Machine A output per worker is 1000 chocolate bars per worker.
5 marks for level 2 answer.
5 marks for the first level 2 calculation. Two level 2 answers = 6 marks; three level 2
answers = 7 marks; four level 2 answers = 8 marks.
Level 3 Three or more level 2 calculations with comments made on these calculations.
Application Knowledge/Analysis/Evaluation
4 (a) The Finance Director says that break-even charts are useful when analysing the
different products that Chocolate Delight produce. Identify and explain two ways
break-even charts can be useful to the Finance Director of Chocolate Delight. [8]
Content:
To estimate how many sales need to be made to cover all the costs; to see what will happen
to the break-even point if costs or prices change; to calculate the margin of safety for the
different products.
1 knowledge mark + up to 2 explanation marks + 1 application mark for each way (4 marks x
2 ways).
Possible application marks: chocolate bars, boxes of chocolates, sweets, cocoa suppliers,
production machinery, factory, R & D Department.
There may be other examples in context which have not been included here.
Way: To estimate how many sales need to be made to cover all the costs. (1 knowledge
mark)
Simple explanation: To estimate how many sales need to be made to cover all the costs so
that the business will not lose money on its output and will make a profit. (1 additional mark
for simple explanation)
Developed explanation: To estimate how many sales need to be made to cover all the costs
(1) so that the business will not lose money on its output and will make a profit (1).
If they did not know what the break-even level of output was then the business might be
losing money and may not be aware of this until the end of the year when the profit and loss
account was calculated.
OR
Break-even analysis allows them to monitor the sales to be sure all the costs are being
covered and if not then they can take some action to cut the costs of cocoa or increase the
sales of chocolates.
(1 further explanation mark for a developed explanation)
Application: The application mark could be achieved as the answer refers to cocoa and sales
of chocolates. (1 application mark)
(b) After buying the new machinery, Chocolate Delight will need to train workers how to
use it. Do you think that on-the-job training will be better than off-the-job training for
Chocolate Delight? Justify your answer by considering both the business and the
employees of Chocolate Delight. [12]
Content:
Advantages of on-the-job training – individual tuition is given; trained in the workplace so
cheaper; some work carried out whilst worker training.
Advantages of off-the-job training – broad range of skills can be taught; evening courses are
cheaper as trainee still does their job.
Disadvantages of off-the-job training – evening classes are tiring so employees may be less
productive next day; less control over what is taught.
Level 1 E.g. Evening courses are cheaper as no lost output. 1 mark for each statement.
Level 2 E.g. Evening courses are cheaper as trainee still does their job during the day. Only
course fees will need to be paid and there will be no lost output during the day.
However, the worker may get very tired working all day and then going to a course
in the evening and so might be less productive at work the next day.
5 marks for level 2 answer. 5 marks for the first level 2 answer, plus 1–2 marks for
each additional level 2 answer. I.e. two level 2 answers = 6 marks; three level 2
answers = 7 marks; four level 2 answers = 8 marks.
However, if the level 2 answer is very well explained then 6 marks can be awarded
for the first level 2 answer. If the second level 2 answer is also very well explained
then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least two level 2 answers. There will be a conclusion at the
end which justifies which training method would be the most effective and why.
Possible application marks: chocolate bars, boxes of chocolates, sweets, private limited
company, limited finance, retained profit for two to three years, skilled workers, quality
chocolate.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Level 3 9–10 marks
Level 2 plus good judgement shown as to the
best method of training for production workers
– this may be either method of training.
Level 2 2 marks 5–8 marks
Well applied to the case. Good discussion of the advantages or
At least two examples of disadvantages of the training methods.
reference to, or use of, Balanced argument.
the case. Some limited judgement shown about which
method should be used.
Level 1 1 mark 1–4 marks
Limited application to the On-the-job and off-the-job training defined or
case. At least one simple statements made on the advantages or
example of reference to, disadvantages of each of the training methods.
or use of, the case.
5 (a) Identify and explain two possible reasons Chocolate Delight buys its cocoa from Fair
Trade cocoa farmers. [8]
Content:
To gain an ethical reputation with consumers; to support cocoa growers in developing
countries; to improve brand image.
1 mark for each reason identified (2 marks max). Up to 2 further marks are available for
explaining why it buys cocoa from Fair Trade cocoa farmers.
2 application marks are also available.
Possible application marks: chocolate bars, boxes of chocolates, Fair Trade cocoa, 10%
higher price, minimum wage, no children, regularly inspected.
There may be other examples in context which have not been included here.
Developed explanation: To support cocoa growers in developing countries (1). This means
that workers will be paid a fair wage and not below minimum wages (App) and this will give
the company a better reputation with its consumers (2). Sales may even increase because of
its ethical reputation (3).
Application: The application mark could be achieved as the answer makes reference to
workers being paid below minimum wage. (1 application mark)
(b) Consider how the economic forecasts shown in Appendix 2 might affect the sales,
costs and profits of Chocolate Delight over the next few years. Do you think these
economic trends will be good or bad for the company? Justify your answer. [12]
Content:
Going into a boom and therefore demand should increase – more chocolates sold so
revenue increases – increased profits; unemployment falling might make it more difficult to
recruit workers – wages might rise; inflation may start to increase leading to increases in raw
material costs – demands for wage increases – less competitive in overseas markets.
Level 1 E.g. Unemployment falling might make it more difficult to recruit workers. 1 mark for
each statement.
Level 2 E.g. Unemployment falling might make it more difficult to recruit workers. The
company might have to increase wages to attract enough job applicants for any
vacancies. This increase in wages will lead to either increased costs or possibly
increased prices for its chocolate bars. This may result in lower sales or, if the
prices stay the same, it could lead to lower profits for Chocolate Delight.
6 marks for level 2 answer plus 1 application mark for mentioning the price of
chocolate bars.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer. I.e. two level 2 answers = 6 marks; three level 2 answers = 7 marks; four
level 2 answers = 8 marks.
However, if the level 2 answer is very well explained then 6 marks can be awarded
for the first level 2 answer. If the second level 2 answer is also very well explained
then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least two level 2 answers. There will be a conclusion at the
end which justifies whether the economic data will be good or bad for the company.
DC (SM/DJ) 31364/3
© UCLES 2011 [Turn over
2
TT Foods
TT Foods is a private limited company and has been in business for 20 years. It produces ready-made
meals for several international airlines. The business is located on the edge of the capital city in Country
X near to the international airport.
The ready-made meals the company produces are purchased by the airlines and served during
international flights. Passengers do not pay for the meals directly.
The business employs 100 production workers who prepare the meals. The workers are paid an hourly
rate and receive no fringe benefits. The workers can take home any leftover food but they have to pay
for it. A high number of production workers leave the company each year because of poor motivation.
The business is not located near any farms and so the food ingredients are purchased from a nearby
wholesaler.
The Directors of TT Foods want to expand the business and they have identified two options.
Expansion Option 1:
Diversify into selling ready-made meals to large food stores. Five new sales staff will need to be
employed to visit the stores to sell the meals. The additional fixed costs for this option are $1000 per
month and the variable cost is $4 per meal. The estimated break-even number of meals is 1000 per
month at a price of $5 per meal. Sales are estimated to be 1500 meals per month.
Expansion Option 2:
To sell ready-made meals to additional airline customers. To do this, TT Foods will need to become
more efficient and competitive. The estimated number of sales is 2000 per month at a price of $4 per
meal. The addition to fixed costs for this option is $1000 per month and the variable cost is $2 per
meal.
Appendix 1
40 000
30 000
Total number of
ready-made meals 20 000
sold through large
food stores
10 000
0
2006 2007 2008 2009 2010
Year
Appendix 2
Appendix 3
Over the last year there has been economic growth of 4% and this has resulted in rising incomes
for many people. There has been an increasing trend for people to fly to other countries on holiday.
With increased incomes, people have been choosing more holidays to nearby countries as well as
going to countries further away.
The airline industry has been experiencing an increase in passengers. This has been welcomed by the
owners of the international airport, as they say this will bring additional revenue to the businesses at
the airport.
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
DC (SM) 31362/3
© UCLES 2011 [Turn over
2
1 (a) The Directors of TT Foods are thinking of introducing machinery into the production and For
packing process. Identify and explain two reasons why the workers might be happy with Examiner’s
this decision. Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) For the new machinery TT Foods will need to raise finance. The Directors are For
considering either taking out a bank loan, leasing the machinery or selling additional Examiner’s
shares to family and friends. Consider these three possibilities for raising finance and Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
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..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
2 (a) Identify and explain two factors that will affect the pricing decisions of TT Foods when For
deciding what price to charge large stores for their ready-made meals. Examiner’s
Use
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) TT Foods want to reduce the costs of the food ingredients they buy. They are considering For
three possibilities: Examiner’s
Use
(i) Keep buying their food from a wholesaler but purchase the food less often in much
larger quantities or
(ii) Buy the food directly from farms or
(iii) Buy their own farms and grow the food themselves.
Consider the advantages and disadvantages of these three possibilities and recommend
which one the Directors should choose. Justify your choice.
(i): .....................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
(ii): ....................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
(iii): ...................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
© UCLES 2011 0450/22/M/J/11 [Turn over
6
3 (a) Appendix 3 suggests that there is increasing demand for airline flights. Identify and For
explain two effects on TT Foods of this increase in the number of passengers. Examiner’s
Use
Effect 1: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Effect 2: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) Consider the two options outlined in the case for expanding the business of TT Foods. For
Recommend which of the options the Directors should choose. Justify your choice using Examiner’s
appropriate calculations. Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
4 (a) Below is an outline for a job (person) specification for a Production Manager. Refer to For
Appendix 2. Explain why each requirement shown below should be included in the job Examiner’s
specification. Use
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
[8]
© UCLES 2011 0450/22/M/J/11
9
(b) When recruiting a new Production Manager the Directors of TT Foods could recruit For
internally or externally. Consider the advantages and disadvantages of these two Examiner’s
different methods of recruiting the Production Manager and recommend which method Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
5 (a) TT Foods have to follow many consumer protection laws. Identify and explain four For
benefits to consumers of such laws. Examiner’s
Use
Benefit 1: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 3: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 4: ..........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) The case mentions that there are a high number of workers leaving the company each For
year because of poor motivation. Consider three different methods that TT Foods could Examiner’s
use to increase motivation of the production workers and recommend which method Use
Method 1: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method 2: .........................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
Method 3: .........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – May/June 2011 0450 22
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) The Directors of TT Foods are thinking of introducing machinery into the production
and packing process. Identify and explain two reasons why the workers might be
happy with this decision. [8]
Content:
Makes their job easier; increases their productivity; may lead to increased wages; may be
promoted; training (if justified in explanation).
Answers must relate to workers and not the company and must refer to being happy
rather than unhappy.
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application; 4 marks for explanation/analysis.
1 mark for each reason identified (2 marks max). Up to 2 further marks are available for
explaining why workers might be happy with this decision.
2 application marks are also available.
Developed explanation: It makes their job easier (1) and so the workers will make less effort
and will be less tired after making all the ready meals which will make them happier (1). This
might lead to fewer workers leaving each year and so the workers will feel more motivated as
they will be working with the same people all the time and they will get to know them well (1).
Application: The application mark could be achieved as the answer makes reference to ready
meals and the high number of workers leaving each year. (1 application mark)
(b) For the new machinery TT Foods will need to raise finance. The Directors are
considering either taking out a bank loan, leasing the machinery or selling additional
shares to family and friends. Consider these three possibilities for raising finance and
recommend which one they should choose. Justify your choice. [12]
Content:
Advantages of a bank loan – paid back in fixed instalments; fixed rate of interest so can
budget for it.
Disadvantages of a bank loan – high rate of interest paid.
Advantages of leasing – don’t have to find all the money straight away; monthly payments;
repairs made for them.
Disadvantages of leasing – never own the machinery; more expensive than buying outright.
Advantages of selling shares – raise additional capital; additional expertise in business.
Disadvantages of selling shares – pay out dividends; loss of some control.
Level 1 E.g. With leasing they don’t have to find all the money straight away. 1 mark for
each statement.
Level 2 E.g. With leasing they don’t have to find all the money straight away to buy the
machinery but they can pay for it in monthly instalments. This is much better for the
company as they want to expand and to produce more ready meals, which will
mean that they have to spend more money on raw materials to make the additional
output and this requires more working capital. To find a large sum of money for
equipment at this time will be difficult.
6 marks for a good level 2 answer plus 1 application mark for mentioning raw
materials for ready meals.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer, i.e. two level 2 answers = 6 marks; three level 2 answers = 7 marks; four
level 2 answers = 8 marks.
However, if the level 2 answer is very well explained then 6 marks can be awarded
for the first level 2 answer. If the second level 2 answer is also very well explained
then 8 marks in total can be awarded.
Level 3 Detailed discussion of three level 2 answers and then a conclusion at the end which
justifies which is the best way to finance the purchase of the new machinery and
why the other ways are less suitable.
2 (a) Identify and explain two factors that will affect the pricing decisions of TT Foods when
deciding what price to charge large stores for their ready-made meals. [8]
Content:
Price of competitors’ products; cost of food ingredients; possible promotion; new market;
product life cycle; increasing incomes; quality; increasing market share; level of demand.
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application; 4 marks for explanation/analysis.
1 mark for each factor identified (2 marks max). Up to 2 further marks are available for
explaining how the pricing decision will be affected.
2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
1 knowledge mark + up to 2 explanation marks + 1 application mark for each factor (4 marks
x 2 factors).
Possible application marks: expansion; rising incomes; increasing economic growth; food
ingredients; farms; wholesaler; perishable ingredients; raw materials; reference to figures
in Option 1 or 2.
There may be other examples in context which have not been included here.
Developed explanation: Cost of food ingredients (1) because the business will need to make
sure they cover all their costs and they do not make a loss (1). If they can keep their costs
down then the prices will also be kept down and TT Foods will be more competitive and
should therefore increase sales (1).
Application: The application mark could be achieved as the answer makes reference to food
ingredients. (1 application mark)
(b) TT Foods want to reduce the costs of the food ingredients they buy. They are
considering three possibilities:
(i) Keep buying their food from a wholesaler but purchase the food less often in
much larger quantities or
(iii) Buy their own farms and grow the food themselves
Content:
(i) Advantages – the price will be lower as buying in bulk; less administration as orders sent
less frequently.
Disadvantages – need to store food; may go off if kept too long; increased storage costs
if need to refrigerate food.
(ii) Advantages – support local economy; may be cheaper; quality may be higher (if
justified).
Disadvantages – higher transport costs; quality may be lower (if justified); may not have
full range of food products.
(iii) Advantages – can decide what to produce; absorb profit from farms; control over quality.
Disadvantages – large capital outlay to buy the farm; may not have expertise to run the
farm; need to employ additional staff with different skills.
Level 1 There will be a large capital outlay to buy the farm in the first place.
1 mark for each statement.
Level 2 E.g. There will be a large capital outlay to buy the farm. This may mean that the
company will have to borrow large sums of money and interest payments may be
high. They may not have the expertise to run the farm and it may not be as efficient.
Therefore there will be higher costs, which may mean that the food products are
more expensive than buying from more efficient producers and the price of ready
meals may have to increase.
6 marks for good level 2 answer plus 1 application mark for mentioning food
products and ready meals.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer, i.e. two level 2 answers = 6 marks; three level 2 answers = 7 marks; four
level 2 answers = 8 marks.
However, if the level 2 answer is very well explained then 6 marks can be awarded
for the first level 2 answer. If the second level 2 answer is also very well explained
also then 8 marks in total can be awarded.
Level 3 Detailed discussion of three level 2 answers and then a conclusion at the end which
justifies which is the best way.
3 (a) Appendix 3 suggests that there is increasing demand for airline flights. Identify and
explain two effects on TT Foods of this increase in the number of passengers. [8]
Content:
Effects – increased sales; raised prices; expansion; increased profit; increased competition;
difficult to meet additional orders; increased employment.
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application; 4 marks for explanation/analysis.
1 mark for each effect identified (2 marks max). Up to 2 further marks are available for
explaining the effect. 2 application marks are also available.
Developed explanation: Increase in the number of sales (1). This should lead to increased
profit as TT Foods may be able to raise the price of the ready meals (1). The amount of
increased sales will depend on how competitive TT Foods is and whether the flights are long
haul flights which serve meals rather than short haul flights which often do not serve meals
(1).
Application: Reference to ready meals. (1 application mark)
(b) Consider the two options outlined in the case for expanding the business of TT Foods.
Recommend which of the options the Directors should choose. Justify your choice
using appropriate calculations. [12]
Content:
Option 1 – TR = $7500
TC = $7000
Profit = $500 (1 x L2 or 2 x L2 if TR and TC not shown)
GPM = 20% (1500/7500 x 100) = 1 additional L2
NPM = 6.7% (500/7500 x 100) = 1 additional L2
Option 2 – TR = $8000
TC = $5000
Profit = $3000 (1 x L2 or 2 x L2 if TR and TC not shown)
Break-even = 500 (2 x L2)
GPM = 50% (4000/8000 x 100) = 1 additional L2
NPM = 37.5% (3000/8000 x 100) = 1 additional L2
(If profit is not calculated, 1 x L2 awarded for TR or TC in each option)
Level 1 E.g. The variable cost of option 1 is twice as high as the variable cost of option 2.
1 mark for each statement.
Level 2 E.g. The net profit for option 1 is $500. 6 marks for correct L2 calculation of profit as
workings have not been shown.
Level 3 Calculations included at three x level 2 and then a conclusion at the end which
justifies which is the best option to choose.
Knowledge/Application/Analysis/Evaluation
4 (a) Below is an outline for a job (person) specification for a Production Manager. Refer to
Appendix 2. Explain why each requirement shown below should be included in the job
specification. [8]
Skills Able to lead a team of So that the manager can motivate people by
workers communicating with them effectively (1) and
make them feel valued as employees so that the
business is more efficient (1).
Experience At least 5 years So that they know how to deal with problems
experience in food and how to do the job (1) without needing
processing further training which is expensive (1).
Personal Well organised The manager will be responsible for many jobs
characteristics that need to be completed (1). He/she will need
to be able to prioritise jobs to ensure that all the
important tasks get completed on time for an
efficiently-run business (1).
(b) When recruiting a new Production Manager the Directors of TT Foods could recruit
internally or externally. Consider the advantages and disadvantages of these two
different methods of recruiting the Production Manager and recommend which
method the Directors should choose. Justify your answer. [12]
Content:
Advantages of internal recruitment – saves time and money; person already known to
business; person knows the way the organisation works; motivating.
Disadvantages of external recruitment – person not known to the business; may not fit in with
other employees; CV may have been misleading about ability; may bring bad habits with
them from previous business.
Level 1 E.g. The company recruits someone already known to the company if it recruits
internally. 1 mark for each statement.
Level 2 E.g. Internal recruitment means that the person recruited is already known to the
business. They already know about making ready meals and what different jobs are
involved in the production process. They will already know the existing employees
and therefore know which ones need encouraging and which ones need to be
watched because they are lazy and therefore they will make a more effective
manager quickly.
6 marks for a good level 2 answer plus 1 application mark for mentioning production
process for ready meals.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer, i.e. two level 2 answers = 6 marks; three level 2 answers = 7 marks; four
level 2 answers = 8 marks.
However, if the level 2 answer is very well explained then 6 marks can be awarded
for the first level 2 answer. If the second level 2 answer is also very well explained
then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least three level 2 answers. There will be a conclusion at
the end which justifies which recruitment method would be the most effective.
Possible application marks: private limited company; expansion; airline industry; high
labour turnover; paid hourly; no fringe benefits; existing workers are demotivated;
increasing economic growth; reference to figures in Option 1 or 2.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
5 (a) TT Foods have to follow many consumer protection laws. Identify and explain four
benefits to consumers of such laws. [8]
Content:
Protects against false claims; protects against inferior quality; protects against indecent
advertising; protects against misleading prices; price controls; protects against the sale of
harmful goods.
The marks available for this question are as follows: 4 marks for knowledge and 4 marks for
explanation/analysis.
1 mark for each benefit identified (4 marks max). Up to 1 further mark is available for
explaining the benefits of the consumer protection laws.
1 knowledge mark + 1 explanation mark (2 marks x 4 benefits).
E.g. Laws to protect consumers are necessary so that consumers are not misled (1).
Otherwise the company could make claims about having certain items in their ready meals
when they do not have any extras or particular contents (1).
(b) The case mentions that there are a high number of workers leaving the company each
year because of poor motivation. Consider three different methods that TT Foods
could use to increase motivation of the production workers and recommend which
method you think will be the most effective. Justify your answer. [12]
Content:
Increase wages; change to piece rate; give fringe benefits; job rotation; job enlargement; job
enrichment; (motivation theories can be rewarded if used to explain how the method
motivates workers but theories are not essential).
Level 1 E.g. Employees would be happy if they had free membership of a gym.
1 mark for each statement.
Level 2 E.g. Employees would be happy if they had free membership of a gym. This will
allow them to use the facilities and it saves them having to pay a membership fee.
Going to the gym would get them fitter and then they will be more efficient when
working in the factory and producing more ready meals.
5 marks for level 2 answer plus 1 application mark for mentioning the production of
ready meals.
5 marks for the first level 2 answer, plus 1–2 marks for each additional level 2
answer, i.e. two level 2 answers = 6 marks; three level 2 answers = 7 marks; four
level 2 answers = 8 marks. However, if the level 2 answer is very well explained
then 6 marks can be awarded for the first level 2 answer. If the second level 2
answer is also very well explained then 8 marks in total can be awarded.
Level 3 Detailed discussion of three x level 2 answers. There will be a conclusion at the end
which justifies which method of motivation would be the most effective and why it is
more effective than the other methods.
Possible application marks: private limited company; ready-made meals; left-over food;
airline flights; high labour turnover; production line; paid hourly; no fringe benefits; existing
workers are demotivated; reference to figures in Option 1 or 2.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
1 IRKAM is a company that produces high quality doors for hotels and offices. The company For
currently uses job production. The Managing Director, Abdul, believes that quality control Examiner’s
is important. He is looking for ways to increase productivity. All workers receive on-the-job Use
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(c) Identify and explain one advantage and one disadvantage of off-the-job training for
IRKAM.
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(d) Identify and explain two reasons why quality control might be important to IRKAM. For
Examiner’s
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(e) Over the past three years there has been a large increase in demand for IRKAM’s doors.
Do you think job production is still the best method of production for IRKAM? Justify
your answer.
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2 Sunil is a sole trader. He likes owning a small business. His shop sells low price raincoats. For
Sales vary throughout the year. The market for raincoats is competitive, but as Sunil makes Examiner’s
a profit he doesn’t think competition is a problem for his business. In order to protect Use
consumers, the Government of Sunil’s country has recently introduced new laws to protect
consumers.
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(b) Identify two factors which could affect demand for Sunil’s products.
Factor 1: ...........................................................................................................................
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(c) Identify and explain two reasons why profit is important to small businesses like Sunil’s.
Reason 1: ........................................................................................................................
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Explanation: .....................................................................................................................
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(d) Identify and explain one way in which consumer protection laws might affect Sunil’s For
business and one way consumer protection laws might affect his customers. Examiner’s
Use
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(e) Do you think the advantages of owning a small business are greater than the
disadvantages for Sunil? Justify your answer.
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3 The Government of country H is concerned about the effect of business activity on the For
environment. It wants to encourage sustainable development. To do this, it is planning to Examiner’s
introduce laws to encourage environmentally-friendly production methods. A number of Use
businesses will be affected by these new laws.
The Government of country H has collected the data shown in Table 1. Gross Domestic
Product (GDP) measures the value of the total output produced in a country in one year. The
GDP of country H has risen from $625m in 2000 to $825m in 2011.
% of GDP
2000 2011
Primary sector 35 15
Secondary sector 40 25
Tertiary sector 25 60
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(c) Identify and explain two changes between 2000 and 2011 that are shown in Table 1.
Change 1: ........................................................................................................................
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© UCLES 2012 0450/11/M/J/12
7
(d) Identify and explain three ways a Government could encourage more businesses to set For
up in its country. Examiner’s
Use
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(e) Do you think that all businesses will be affected by the introduction of the new laws to
encourage environmentally-friendly production methods? Justify your answer.
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4 Rapid Call is a private limited company. It manufactures a range of cell (mobile) phones. For
The demand for these is increasing. Its products have several special features that are Examiner’s
not available from other phone manufacturers. It sells its products directly to retail shops. Use
Rapid Call uses competitive pricing for all products. The Finance Director has been looking
at the accounts. A summary is shown in Table 2. In 2011 the gross profit margin was 40%.
Table 2: Profit/Loss Account for Rapid Call for year ending 30 April 2012 ($000s)
Sales 450
Cost of Sales 300
Gross Profit 150
Overheads 95
Net Profit 55
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(b) Calculate the gross profit margin for the year ending 30 April 2012.
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(c) Identify and explain two ways in which Rapid Call’s Finance Director could use the
information in Table 2.
Way 1: ..............................................................................................................................
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(d) The Marketing Director is thinking about changing the channel of distribution. Identify For
and explain three factors that Rapid Call should consider when choosing a suitable Examiner’s
channel of distribution. Use
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5 Favell is a woodworker. He is planning to set up his own woodworking business. He plans For
to use marketing to help his business become established in the local area. Favell thinks Examiner’s
cash flow will be a problem because his business will have a lot of cash outflows. A friend Use
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(c) Identify and explain two benefits for any business of preparing a cash flow forecast.
Benefit 1: ..........................................................................................................................
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Benefit 2: ..........................................................................................................................
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(d) Favell is looking at various methods of promotion for his business. Identify and explain For
three suitable methods of promotion that Favell could use to attract customers. Examiner’s
Use
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(e) Favell needs $10 000 to buy a motor vehicle so that he can carry all his equipment. He is
planning to ask the bank for an overdraft. Do you think this is the most suitable source of
finance for him to choose? Justify your answer.
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BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2012 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – May/June 2012 0450 11
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Clear understanding [2] e.g. a measure of the output of a business in relation to its inputs [2]
or effective utilisation of resources/in a time period.
Some understanding [1] e.g. output per worker/measure of efficiency/rate at which they
produce goods.
Clear understanding [2] e.g. Training which involves watching a more experienced worker
doing the job in the work place.
Some understanding [1] e.g. get training whilst still working/at the work place/learning from
another worker.
(c) Identify and explain one advantage and one disadvantage of off-the-job training for
IRKAM. [4]
Knowledge [2 × 1]: award 1 mark for the advantage and 1 mark for the disadvantage.
Advantages include:
• experienced worker’s production is not affected as training happens away from work
place
• learner has access to trainers who are skilled in the task
• workers will not learn bad habits of on-the-job trainer
• quality of product maintained as all work completed by experienced workers
• less impact on output as current workers do not have to spend time training new people.
Disadvantages include:
• more expensive than on the job which increases costs for the business. For example
transport costs/paid trainer
• loss of first hand experience/not necessarily tailored to individual company
• no output produced by learner whilst training taking place.
(d) Identify and explain two reasons why quality control might be important to IRKAM. [6]
(e) Over the past three years there has been a large increase in demand for IRKAM’s
doors. Do you think job production is still the best method of production for IRKAM?
Justify your answer. [6]
Evaluation [2]: reasoned judgement made as to whether ‘job’ is still best method for IRKAM
to use.
For two evaluation marks, the answer must be clearly in the context of this business.
Context could include: high quality; quality control is important; looking for ways to
increase productivity.
Clear understanding [2] e.g. profit is the amount of money that a business makes once costs
have been subtracted from the revenue [2]. Or total revenue minus total costs [2]. Formula is
acceptable for two marks.
Some understanding [1] e.g. money left after costs paid.
Answers such as money made by a business [0].
For both marks must have idea that there is both sales and cost element to profit.
(b) Identify two factors which could affect demand for Sunil’s products. [2]
(c) Identify and explain two reasons why profit is important to small businesses like
Sunil’s. [4]
Reasons include:
• reward for risk taking
• source of funds for expansion
• source of funds for emergency
• main reason for the existence of many small businesses/motivation
• necessary for survival
• difficult to obtain other sources of finance as Sunil is a sole trader.
(d) Identify and explain one way in which consumer protection laws might affect Sunil’s
business and one way consumer protection laws might affect his customers. [6]
(e) Do you think the advantages of owning a small business are greater than the
disadvantages for Sunil? Justify your answer. [6]
Evaluation [2]: reasoned judgement made as to whether advantages are greater than
disadvantages for Sunil.
For two evaluation marks, the answer must be clearly in the context of this business.
Points include:
• able to offer personal service
• own boss
• size of market
• need to be creative
• lack of finance
• threat of competition
• lack of skills if only Sunil
• lack of economies of scale
• unlimited liability.
Context could include: sole trader; likes owning business; very competitive market; new laws;
makes a profit; low price raincoats.
Clear understanding [2] e.g. industry which provides/sells services [1] to consumers and/or
other sectors of the economy.
Some understanding [1] e.g. provide services plus an example [+1].
Do not accept examples on their own e.g. delivery company, accountant, shop.
Clear understanding [2] e.g. being able to maintain levels of production for a good or service
over a long period of time OR ability to meet needs of present population without
compromising ability of future generations to meet their own needs.
Some understanding [1] e.g. able to maintain output for ages/no impact on surroundings/
production which does not damage (or pollute) the environment.
(c) Identify and explain two changes between 2000 and 2011 that are shown in Table 1. [4]
Analysis [2 × 1]: award 1 mark for each relevant explanation (i.e. why change occurred).
Changes shown:
• Fall in primary sector [1] – because of number of poor harvests/reduction in land
available for farming/people move to other sectors in search of higher wages/
environmental protection laws/more recycling leads to less demand for the primary sector
• Fall in secondary sector [1] – due to cheaper costs of manufacturing overseas/changes in
demand so less products sold by country H/environmental protection laws
• Rise in tertiary sector [1] – increased incomes so people are able to spend more on
services and leisure activities/skills base changed so more suited to service provision/
more developed country.
(d) Identify and explain three ways a Government could encourage more businesses to
set up in its country. [6]
Analysis [3 × 1]: award 1 mark for each relevant explanation (i.e. explain how help
encourage businesses to set up).
Ways include:
• grants or subsidies
• low rent
• lower interest rates
• laws
• provision of training
• tax allowances
• advisory services
• development areas
• tariffs and quotas.
(e) Do you think that all businesses will be affected by the introduction of the new laws to
encourage environmentally-friendly production methods? Justify your answer. [6]
Evaluation [2]: reasoned judgement made as to effect of new environmental laws on ALL
businesses.
Disadvantages include:
• techniques/products might be banned so unable to make or sell products
• changes might lead to increased costs for business e.g. new machinery leads to
increased costs
• could place business at competitive disadvantage if laws do not apply to competitors from
other countries.
Advantages include:
• could improve image of business if seen as environmentally friendly leading to increased
reputation and sales
• new business opportunities as customers want ‘green’ products
• new techniques could help reduce waste or increase efficiency so lower costs in long run
• might already adopt environmentally friendly practices so no impact
• laws might help ensure that resources are better used so could continue to operate for
longer time.
Clear understanding [2] e.g. a company whose shares cannot be sold to the general public.
Some understanding [1] e.g. outlines general features of limited companies e.g. have limited
liability/separate legal identity from owners/can sell shares.
Do not accept in private sector – generic statement which also applies to unlimited
businesses.
(b) Calculate the gross profit margin for the year ending 30 April 2012. [2]
(c) Identify and explain two ways in which Rapid Call’s Finance Director could use the
information in Table 2. [4]
Analysis/application [2]: award 1 mark for each relevant explanation (i.e. to explain how or
why help).
Ways include:
• gross profit margin can be calculated [k] which can be compared to previous years to see
if the GP has risen or fallen [an]/which can be compared to other companies [an]
• costs of goods sold might have risen [k] and so could try to find cheaper suppliers [an]
• might use the information to adjust marketing strategy [k]
• show value added [k].
For an answer that accurately calculates the Gross profit margin [33%] or the Net profit
margin [12.22%] award 2 marks [an].
(d) The Marketing Director is thinking about changing the channel of distribution. Identify
and explain three factors that Rapid Call should consider when choosing a suitable
channel of distribution. [6]
Analysis/application [3 × 1]: award 1 mark for each relevant explanation (i.e. explain how
or why it is an issue for Rapid Call).
Factors include:
• where it is to be sold
• cost of transport
• type of product
• level of demand
• amount of control required by company
• size of company
• costs of storage [storage alone 0]
• speed
• location/profile of customers.
Do not award analysis/application marks for points which clearly cannot be applied to a
mobile phone manufacturer e.g. perishable.
(e) How important is increased competition in influencing the marketing strategy of Rapid
Call? Justify your answer. [6]
Knowledge [2]: Identification of relevant issues or factors influencing the marketing strategy.
Issues include:
• competitive pricing – prices are in line with those of competitors to maintain level of sales.
Too high or too low could affect level of demand or sales revenue.
• special features could suggest that competition is forcing RC to change what they sell in
order to compete
• product – special features could mean that competition is not important as rivals do not
have features
• promotions will need to attract as well as inform potential customers in order to ensure
sales
• if business does not respond to competition they could lose sales/market share
• need to ensure that products are available at right time otherwise could lose sales to
rivals.
Clear understanding [2] e.g. identifying and anticipating customer wants and then providing
it.
Some understanding [1] e.g. selling the product or 1 core element of marketing identified,
such as promotion or pricing or market research.
(b) Identify two possible cash outflows for Favell’s business. [2]
(c) Identify and explain two benefits for any business of preparing a cash flow forecast. [4]
Benefits:
• able to arrange finance to avoid cash flow problems
• help planning
• see (predict) when money goes in or out of business
• support loan applications
• businesses more likely to have cash flow problems in early years.
Analysis [2 × 1]: award 1 mark for each relevant explanation (i.e. show how it will help a
business).
(d) Favell is looking at various methods of promotion for his business. Identify and
explain three suitable methods of promotion that Favell could use to attract
customers. [6]
Analysis/application [3 × 1]: award 1 mark for each relevant explanation (i.e. shows how or
why it is a suitable method for Favell to use).
Methods include:
• leaflets
• posters
• adverts in the local paper or local radio or internet
• advertising on side of vehicle that he wishes to buy
• discount/promotional pricing
• sponsorship
• warranty or after sale services
• competitions
• demonstrations
• public relations
• BOGOFF
• free sample/gifts.
Do not award analysis/application marks for points which clearly cannot be applied to a
woodworking business.
(e) Favell needs $10 000 to buy a motor vehicle so that he can carry all his equipment. He
is planning to ask the bank for an overdraft. Do you think this is the most suitable
source of finance for him to choose? Justify your answer. [6]
Knowledge [2 × 1]: Identification of points for and against overdrafts or for and against
alternative sources of finance.
Evaluation [2]: reasoned judgement as to whether a overdraft is the best method to use or
not.
For two evaluation marks, the answer must be clearly in the context of this business
Overdraft:
• only interest payable on amount overdrawn
• quick and easy to arrange
• no security but repayable on demand so more appropriate for short term finance such as
cash flow problems. So is it suitable for fixed assets such as a vehicle?
• can be expensive as interest rates tend to high.
Loan:
• have a set period of time to repay
• fixed interest rate
• relatively quick to arrange
• appropriate for a vehicle as it is a long term asset
• but can be expensive as interest payable
• security usually required for loan.
Context could include: The business has cash flow issues; Wants to do marketing;
$10 000 needed for vehicle; is a small business.
KSS was set up ten years ago as a private limited company. The business manufactures sports
shoes. It has grown slowly because the market is very competitive. It has been difficult to increase
the company’s small market share. The company has share capital of $1m. The shares are owned by
Emmanuel and his father.
KSS has three main types of products: men’s trainer sports shoes, women’s trainer sports shoes and
children’s trainer sports shoes.
Emmanuel wants to increase the company’s market share. To do this, Emmanuel has designed a new
football boot which has many features that are better than competitors’ football boots. The new boot
helps footballers to kick the ball much more accurately. The company has a patent on the new football
boot. A patent stops other companies copying the design.
Emmanuel has considered Option 1 and Option 2 below. He has chosen Option 1.
Option 1:
Borrow $10m to enable KSS to produce, promote and distribute the new football boot worldwide. The
company would need to expand production and employ new workers and managers. The company
would only be able to sell the new football boot in a few countries to start with. This is because KSS
does not have links with agents or retail businesses in many countries.
Option 2:
Sell the patent to a multinational sports company. KSS would be paid 10% of all sales revenue from
the football boots each year. The multinational company would find it easy to manufacture, advertise
and sell the football boot all over the world. Advertising the new football boot would be expensive. The
multinational company has established links with retail businesses in many different countries.
Appendix 1
Memorandum
To: Emmanuel
From: Production Manager
Date: 15th April 2012
You asked me to compare labour-intensive production methods with capital-intensive methods for
manufacturing the new boot. Here are the forecasts.
Labour-intensive Capital-intensive
methods methods
There are other factors to consider such as illness, repair costs and the number of hours the new
machinery can operate.
Appendix 2
A new football boot has been designed by local company KSS. Professional footballers are telephoning
the company trying to order these new boots. The new football boot improves accuracy when kicking
the ball, making the new boot a ‘must have’ for all serious football players. The company has not yet
launched the football boot on the market and the price has not been announced.
Appendix 3
Estimated cost figures for the new football boot prepared by KSS production department
These costs are estimated on maximum production of 5000 football boots per week.
Competitors’ football boots cost between $40 and $50 per pair.
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
1 (a) The new football boot is being developed. Identify and explain four stages of the future For
product life cycle of the new football boot. Examiner’s
Use
Stage: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Stage: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Stage: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Stage: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) Consider why each of the following departments will be important to the success of the For
new football boots. Justify your answer using information in the case. Examiner’s
Use
Production: .......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Marketing: ........................................................................................................................
..........................................................................................................................................
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Finance: ...........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
................................................................................................................................... [12]
2 (a) KSS production workers are highly skilled in doing just one task on the production line. For
Identify and explain two advantages and two disadvantages of workers being skilled in Examiner’s
just one task. Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage 1: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Disadvantage 2: ...............................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [8]
(b) The Production manager believes that labour-intensive methods are better than capital- For
intensive methods of production for the new football boots. Do you agree with him? Examiner’s
Justify your answer using appropriate calculations from the information provided in Use
Appendix 1.
Labour-intensive: .............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Capital-intensive: .............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Conclusion: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
................................................................................................................................... [12]
3 (a) Good communication is important to Emmanuel. He has the following information to For
communicate. Examiner’s
Use
Identify a suitable method of communication for each situation. Explain why each
method is suitable.
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Method for ‘there has been an error with a delivery of some supplies’: ...........................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) Labour costs are much lower in other countries. Many sports shoe manufacturers For
produce in those countries. Consider the advantages and the disadvantages to KSS Examiner’s
of manufacturing its football boots in another country. Do you think KSS should move Use
Advantages: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantages: ................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Conclusion: .......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]
4 (a) Identify and explain two benefits to KSS of creating a brand image for its new football For
boot. Examiner’s
Use
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) Emmanuel needs to decide a pricing strategy for the new football boot. Consider For
price skimming, cost-plus pricing and competitive pricing. Which do you think is the Examiner’s
best pricing strategy for Emmanuel to use? Justify your answer using information in Use
Appendix 3.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
................................................................................................................................... [12]
5 (a) The new football boot will be exported to many different countries. Identify and explain For
four possible problems KSS may have when exporting the new football boot. Examiner’s
Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 3: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Problem 4: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [8]
(b) Emmanuel has already chosen Option 1. Was it the right decision to choose For
Option 1 rather than Option 2? Justify your answer by considering the advantages Examiner’s
and disadvantages of each option. Use
Option 1: ..........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Option 2: ..........................................................................................................................
..........................................................................................................................................
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Conclusion: ......................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes must be read in conjunction with the question papers and the report on the
examination.
• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2012 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme: Teachers’ version Syllabus Paper
IGCSE – May/June 2012 0450 21
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer and the senior examiners should be consulted if further guidance is
required.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) The new football boot is being developed. Identify and explain four stages of the
future product life cycle of the new football boot. [8]
Content:
• Introduction/Launch
• Growth
• Maturity
• Saturation
• Decline.
Explanation marks are likely to be for reference to one or more of the following:
sales; competition; profit; demand; pricing/pricing strategy; advertising.
The marks available for this question are as follows: 4 marks for knowledge; 4 marks for
explanation.
1 mark for each stage identified plus 1 explanation mark for each stage.
For example:
The introduction stage (1 knowledge mark) is when the new product is launched onto the
market and the sales start to grow quickly. (1 explanation mark)
(b) Consider why each of the following departments will be important to the success of
the new football boots. Justify your answer using information in the case. [12]
Content:
Production e.g. important to produce the football boots efficiently and to a high quality.
Marketing e.g. the new boots need to be launched onto the market and consumers need to
be persuaded to buy them.
Human resources e.g. new employees need to be employed with the correct skills or arrange
training.
Level 1 e.g. production department has to ensure the football boots are produced without
faults. 1 mark for each statement.
Level 2 e.g. production department has to ensure the football boots are produced without
faults otherwise customers will think they are not getting a high quality football boot
and will not be willing to pay a high price for the football boot. They need to be
produced efficiently because costs need to be kept down so that profits will be high.
6 marks for level 2 answer.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
2 (a) KSS production workers are highly skilled in doing just one task on the production
line. Identify and explain two advantages and two disadvantages of workers being
skilled in just one task. [8]
Content:
Advantage
• increased production/output
• increased efficiency/productivity
• less training required
• skilled workers have higher pay
• quality improved.
Disadvantage
• monotonous for workers
• less variation of products
• workers cannot do other jobs as specialised in one task
• absence disrupts production
• quality could be worse if workers are bored.
Do not reward the reverse argument unless explained e.g. advantage – quality improves and
disadvantage – quality deteriorates = 1 mark only as no further explanation of why quality
might change.
Explanation: Less training will be required as the worker only has to learn one task and they
can do this quickly. (1 additional mark for explanation)
(b) The Production manager believes that labour-intensive methods are better than
capital-intensive methods of production for the new football boots. Do you agree with
him? Justify your answer using appropriate calculations from the information
provided in Appendix 1. [12]
Content:
• Employs more workers (L1)
• Lower wages for labour-intensive methods (L1)
• More shoes produced per worker (L1)
• 200%/50% difference in output (L1)
• Calculations of total wages per day (L1).
100 people × $5 × 8 hours × 5 days (L1) 3 people × $20 × 8 hours × 5 days (L1)
100 × 5 = 500 (L1), 500 × 8 = 4000 (L1) 3 × 20 = 60 (L1), 60 × 8 = 480 (L1)
Level 2 e.g. capital-intensive uses machines to replace workers. This means they can
achieve output with significantly fewer workers and lower total wage costs but at the
expense of leasing machinery. 5 marks for level 2 answer.
Level 3 Detailed discussion of at least three level 2 answers. There will be a conclusion at
the end which justifies which production method would be the most effective and
why.
Knowledge/Application/Analysis/Evaluation
Identify a suitable method of communication for each situation. Explain why each
method is suitable. [8]
Content:
• All employees are to receive a wage increase – notice board, letter, meeting, email,
intranet (not internet)
• An error with a delivery of supplies – telephone, email, fax.
1 mark for each suitable method identified (2 marks max). Three further marks are available
for explaining why the method will be effective.
For example:
(i) He could use a letter (1 mark for knowledge) to inform the workers that they are to be
given a wage increase. This would be suitable because all employees will receive the
letter at home (1). This will ensure that all the employees will be informed personally (1)
and so there should be no misunderstanding or employees missing the message as they
are on holiday or ill (1).
(b) Labour costs are much lower in other countries. Many sports shoe manufacturers
produce in those countries. Consider the advantages and the disadvantages to KSS of
manufacturing its football boots in another country. Do you think KSS should move
manufacturing to another country? Justify your answer. [12]
Content:
Advantage Disadvantage
Level 1 e.g. if they move to a country where labour costs are much lower then costs of
production of the football boots will be lowered. 1 mark for each statement.
Level 2 e.g. if they move to a country where labour costs are much lower then costs of
production of the football boots will be lowered. The labour costs may be lower but
the workers may be less well trained and so may be less efficient when producing
the football boot (L2). This will either increase the cost of training the production
workers or the quality of the boot may be lower and this will lead to a poor reputation
(L2). 6 marks for a good level 2 answer.
Level 3 Detailed discussion of at least three level 2 answers. There will be a conclusion at
the end which justifies whether or not they should move manufacturing and why.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
4 (a) Identify and explain two benefits to KSS of creating a brand image for its new football
boot. [8]
Content:
• To make the product well known
• To differentiate the product from its competitors
• To encourage brand loyalty
• Can charge a higher price
• Increase sales.
For example:
To make the football boots well known. (1 knowledge mark) The football boots will be easily
recognised by other people and this will make them want to buy the boot (1) if famous
football players wear the boot then sales will increase and so will profits. (1)
Application: The application mark could be achieved as the answer refers to famous football
players. (1 application mark)
There may be other examples in context which have not been included here.
(b) Emmanuel needs to decide a pricing strategy for the new football boot. Consider price
skimming, cost-plus pricing and competitive pricing. Which do you think is the best
pricing strategy for Emmanuel to use? Justify your answer using information in
Appendix 3. [12]
Content:
Price skimming
• set a high price
• higher than $50
• establishes high quality product
• may put off some customers.
Cost-plus pricing
• average cost calculated and then a percentage is added on for profit
• $15 direct costs plus $4 indirect costs = $19 per boot plus profit
• easy to apply this method
• competitors’ price may be lower.
Competitive pricing
• set pricing around the same price as competitors’ prices
• competitors charge $40-$50 per pair and so Emmanuel should charge about $45
per pair of boots
• sales possibly higher, research costs to check on competitors’ process.
Level 1 e.g. Cost-plus pricing is where the cost is calculated and then a profit is added to
determine the price to charge customers.
Level 2 e.g. Cost-plus pricing is where the cost is calculated and then a profit is added to
determine the price to charge customers. If they calculate the cost per boot at $19
and so a profit can be added (L2). This is a simple way to work out the price of the
boot but it may not result in higher profits being earned if it doesn’t look at
competitors prices (L2). 6 marks for level 2 answer.
Level 3 Detailed discussion of at least three level 2 answers. There will be a conclusion at
the end which justifies which pricing strategy would be the most effective and why.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
5 (a) The new football boot will be exported to many different countries. Identify and explain
four possible problems KSS may have when exporting the new football boot. [8]
Content:
• Exchange rate changes
• Import restrictions
• Increased risk of non-payment
• Customs different
• Increased transport costs
• Language barriers
• Marketing costs.
1 mark for each problem identified (4 marks max). Plus 1 further mark available for
explaining why each is a problem.
For example:
There might be import restrictions (1 knowledge mark) and this will add to the price the
product sells for and may lead to lower demand for the product. (1 explanation mark)
(b) Emmanuel has already chosen Option 1. Was it the right decision to choose Option 1
rather than Option 2? Justify your answer by considering the advantages and
disadvantages of each option. [12]
Content:
Gain all the profits Large capital outlay Don’t have Doesn’t gain all the
advertising expenses profits
Level 1 e.g. Option 2 does not require a large capital outlay. 1 mark for each statement.
Level 2 e.g. Option 2 does not require a large capital outlay. This means the owners do not
have to raise $10m which is a large sum as they only have $1m invested at the
present time. They would not need to sell more shares which could mean they
would lose control of the business. 5 marks for level 2 answer plus 1 application
mark for mentioning $1m share capital.
Level 3 Detailed discussion of at least three level 2 answers. There will be a conclusion at
the end which justifies which option to choose and why.
Possible application marks: Football boots/boots; set up 10 years ago; manufacturing sports
shoes; grew slowly; competitive market; small market share; helps footballers to kick the ball
more accurately; patent; multinational sports company; expand production; employ new
workers and managers; no links with agents or retail businesses abroad; 10% of sales
revenue; sell all over the world; labour intensive/capital intensive; football players; $1m
share capital; reference to figures in Appendix 1 or 3 and also Option 1 and 2.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
1 Durban Dragons is a big football club. Recently fewer people have been watching its matches For
and ticket revenue is falling. Some people say that ticket prices for matches are too high Examiner’s
and should be reduced. The club has high fixed costs and needs to improve its cash flow. Use
The club directors have been trying to gain sponsorship and a number of businesses are
very interested.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Give two examples of fixed costs that a business like a football club would incur.
Example 1: .......................................................................................................................
(c) Identify and explain two ways the cash flow of Durban Dragons could be improved.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
(d) Identify and explain two reasons why businesses might want to sponsor football clubs For
like Durban Dragons. Examiner’s
Use
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think if Durban Dragons reduce ticket prices for matches this will increase
revenue? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
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..........................................................................................................................................
..........................................................................................................................................
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2 Gresham Textiles manufactures high quality clothing. Production is labour intensive. For
Managers are paid more than production line workers in the factory. The business is investing Examiner’s
in automated machinery. The management also wants to introduce lean production methods. Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two suitable sources of finance that Gresham Textiles could use to finance the
investment in automated machinery.
Source 1: .........................................................................................................................
(c) Identify and explain two reasons why factory managers are paid more than production
line workers at Gresham Textiles.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
(d) Identify and explain two ways lean production methods could reduce costs in the factory. For
Examiner’s
Way 1: .............................................................................................................................. Use
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that a change to automated methods of production would benefit
customers of Gresham Textiles? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]
3 Table 1 shows the Balance Sheet for company D at the end of 2010 and 2011. For
Examiner’s
Table 1: Company D Balance Sheet [$m] Use
2010 2011
Fixed Assets 500 600
Current Assets 600 650
Current Liabilities 450 550
Net Assets 650 700
The accounts also showed that the net profit of company D was $80m in 2010 and $120m
in 2011.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
..........................................................................................................................................
..................................................................................................................................... [2]
(c) The directors are planning further expansion of the company. Identify and explain two
benefits to company D of raising finance by selling more shares.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
(d) Identify and explain a reason why the following stakeholders would be interested in For
using company D’s accounts. Examiner’s
Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Do you think the performance of company D in 2011 has improved? Justify your
conclusion using the data provided.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
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..................................................................................................................................... [6]
4 Jergen Cosmetics makes a range of beauty products for women in country A. ‘We are a For
market orientated company’ said Klaus, the Managing Director. ‘One of our business Examiner’s
objectives is to increase sales turnover. We have just set up our own website and increased Use
our marketing budget. Our country’s economic growth is forecast to be 4% next year and this
will guarantee our company’s profitability.’
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two benefits to Jergen Cosmetics of setting business objectives.
Benefit 1: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
(d) Identify and explain two benefits to Jergen Cosmetics of having its own website. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Benefit 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
(e) Do you think that economic growth in country A will lead to increased profitability for
Jergen Cosmetics? Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
5 Greenfield manufactures furniture. The company imports wood and other raw materials For
from several countries. Marcos is the Managing Director of Greenfield. Marcos said that his Examiner’s
company was affected by import quotas and changes in exchange rates. He said: ‘Greenfield Use
has to buy its raw materials from other countries as there are no timber (wood) resources in
our own country.’
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [2]
(b) Identify two ways that Greenfield’s business might harm the environment.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways in which changes in exchange rates could cause problems
for Greenfield.
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [4]
(d) The Government in Greenfield’s country is introducing consumer protection laws. For
Identify and explain three ways in which Greenfield’s business could be affected by Examiner’s
these new laws. Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Way 3: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) Greenfield’s management is thinking of expanding the business by taking over another
furniture manufacturer. Do you think this is a good idea for Greenfield? Justify your
answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [6]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2012 series for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level
components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – October/November 2012 0450 11
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer and the senior examiners should be consulted if further guidance is
required.
(b) Give two examples of fixed costs that a business like a football club would incur. [2]
Fixed costs refers to any cost incurred by the business as a result of its existence [unaffected
by the volume of work undertaken]. Thus costs might include – insurance/rates/rent/salaries
etc. Allow any reasonable suggestion. Do NOT allow wages or purchase of football
equipment such as balls or shirts.
(c) Identify and explain two ways the cash flow of Durban Dragons could be improved. [4]
Cash flow can be improved by any method that alters the amounts and timing of the flows
into and out of the business. Methods might include:
• Selling season tickets [way] would improve cash flow because cash would be received
earlier
• Gaining sponsorship would improve cash flow by attracting in more cash earlier
• Delaying payment to creditors would also improve cash flow by postponing cash
outflows until later
• Delaying payment of wages as this would postpone cash outflows
• Arranging an overdraft facility (or short term loan) would give access to cash immediately
and would therefore allow a business to meet its short term financial obligations
• Disposal of unwanted fixed assets would turn assets into cash
Methods could be in context of a football club but this is not required.
Do NOT allow answers such as cutting costs unless explained. For example, an answer that
says selling a number of players would only be credited if they explained that the wage bill
would be reduced and so therefore would the cash outflow.
(d) Identify and explain two reasons why businesses might want to sponsor football clubs
like Durban Dragons. [6]
(e) Do you think if Durban Dragons reduce ticket prices for matches this will increase
revenue? Justify your answer. [6]
Content: A reduction in ticket prices means that the ‘product’ is cheaper and hence more
affordable (k). This should increase the demand for tickets. Thus revenue should increase
(an). However this depends on the price elasticity of demand for tickets (an) (use of technical
language not required). If people are not attending the matches because of reasons like the
team is always losing/playing unattractive football (k) then the price fall might not have much
of an impact (an). Thus price is NOT the reason for the falling demand (ev). Indeed the
revenue could be reduced if prices are reduced (ev). Total revenue is the outcome of volume
sales times unit price (k).
The analysis does NOT need to be in context to be rewarded. Thus answer could refer to
things like product and price rather than simply applied to a football context.
(b) Identify two suitable sources of finance that Gresham Textiles could use to finance the
investment in automated machinery. [2]
(c) Identify and explain two reasons why factory managers are paid more than production
line workers at Gresham Textiles. [4]
Factors to include:
• State of labour market
• Skills greater
• Shortage of manager [scarcity value]
• Ready supply of production line workers
• Greater responsibility
• Age and experience might differ
• Value to the company differs
• More demanding/important job
(d) Identify and explain two ways lean production methods could reduce costs in the
factory. [6]
(e) Do you think that a change to automated methods of production would benefit
customers of Gresham Textiles? Justify your answer. [6]
Knowledge [2]
Application/analysis [2]
Evaluation [2]
Capital employed refers to the money invested in the business on a long term basis [2]. It
measures the value of the assets at the disposal of the management. [2] It is often measured
in terms of long term loans plus shareholders funds [2]. Also accept for full marks a formulae
type answer such as TA – CL or FA + CA – CL
Some understanding would be an answer that said it is the money [capital] used in the
business [1].
Application/analysis [2]
(c) The directors are planning further expansion of the company. Identify and explain two
benefits to company D of raising finance by selling more shares. [4]
(d) Identify and explain a reason why the following stakeholders would be interested in
using Company D’s accounts. [6]
Creditors owed money so keen to see size of other debts of business and what security
exists – assess risk of default.
Employees might show them how profitable the business is and therefore how secure their
employment is/potential for higher wages in the future.
Shareholders would assess the profitability of the business and use it to assess the use of
their funds.
NB Other reasons for each stakeholder’s interest could be made which are also valid. Future
creditors also acceptable as an interpretation of the question i.e. looking ahead to assess
credit worthiness.
(e) Do you think that the performance of company D in 2011 has improved? Justify your
conclusion using the data provided. [6]
Any manipulation of figures gains analysis marks e.g. calculation of ratios or calculation of %
rate of increase. Calculation of same ratio for one or both years gains 1 mark.
If an answer just looks at net profit and says $80m in 2010 and $120m in 2011 and/or fixed
assets have risen from $500m to $600m and net assets have increased from $650m to
$700m so the performance is better because it is more profitable. This answer just looks at
the figures and draws simple conclusions. It will gain 2 marks [1 for K and 1 for Ev but NO
application/analysis mark]
(c) Identify and explain two benefits to Jergen Cosmetics of setting business objectives.
[4]
Knowledge [2]
Application/analysis [2 × 1]
(d) Identify and explain two benefits to Jergen Cosmetics of having its own website. [6]
Knowledge [2]
Application/analysis [2 × 2]
Website would:
• Increase public awareness
• Enhance reputation
• Boost sales
• Improve image
• Allow customers to view their product range
• Lower advertising costs
• Allow online sales
So an answer might say that a website would mean that potential customer could see a full
range of beauty products that they make. This would allow them to be more aware of the full
range and might encourage them to buy, boosting sales for Jergen. Second benefit might be
that the website might enhance the profile of the company. It will seem ‘more important’ and
fashionable and hence might attract new customers to the business. This too will boost sales
and profits.
Analysis/application for showing how the points actually represent a benefit and how a
website helps achieve them.
(e) Do you think that economic growth in country A will lead to increased profitability for
Jergen Cosmetics? Justify your answer. [6]
Knowledge [2]
Application/analysis [2]
Evaluation [2]
The growth in an economy should mean greater prosperity, lower unemployment and higher
consumer spending in general. However this does not mean that all sectors will benefit to the
same degree. It certainly does not mean that all businesses will gain either. A successful
business has products that are in demand and that they can be supplied at a price that is
acceptable to the consumer and high enough to generate a profit to the business. The state
of the economy has little impact on these factors. However in so far as higher sales may lead
to higher profits then economic growth should help Jergen.
(b) Identify two ways that Greenfield’s business might harm the environment. [2]
Application [2 × 1]
Their resources are mainly wood which is imported and therefore carbon footprint/pollution is
high. The business may encourage the depletion of forests by increasing the demand for
wood. The business also adds to pollution in terms of global warming and destruction of
natural habitats. 1 mark per way. Answer must be in context.
(c) Identify and explain two ways in which changes in exchange rates could cause
problems for Greenfield. [4]
Knowledge [2 × 1]
Application/analysis [2 × 1]
Explanation of how this might cause problems for Greenfield. Answer might say that the
business imports raw materials and so a depreciation in their country’s currency means that
the cost of their furniture will rise. This causes a problem for Greenfield because profit
margins will be reduced. Reference to BOTH appreciation and depreciation can be credited
as separate points.
Knowledge [3 × 1]
Application/analysis [3 × 1]
Knowledge [2]
Application/analysis [2]
Evaluation [2]
The evaluation could be something like: ‘I think it would be a good idea to do this because it
should allow the business to increase its sales and market share making it more profitable
and more secure’.
It is not necessary to cover both the advantages and the disadvantages for Greenfield for full
marks.
DC (NF/SW) 49273/1
© UCLES 2012 [Turn over
2
K’s Garage
Kolo has worked as a mechanic repairing motor cars for over 10 years. He now wants to start his own
business selling and repairing cars. He wants to set up as a sole trader business and call his business
K’s Garage. He hopes to have both business customers and private customers.
Kolo thinks he will need to employ two other trained mechanics, as well as two experienced sales staff
for selling cars. Kolo will do the accounts and administration for the garage and also deal with customer
enquiries.
There are three possible sites where he could locate his garage.
Site A:
Site A is on a busy road close to the city centre. The rent on the property is $20 000 per year for a small
workshop and car showroom (where cars for sale are displayed). It is near other garages which sell
new cars. The site is located in a business area and there are no houses nearby.
Site B:
Site B is on a road on the edge of a housing estate. There are many people living in the area who own
cars. The rent for this site is $15 000 per year. The site has a large car showroom and workshop. There
are no other garages in the area and only a few shops nearby which sell food. Not many people use the
road.
Site C:
Site C is in an area outside the city with no housing or businesses nearby. The site is for sale for
$10 000. It is a large area of land with a big garage on the site, but the buildings need repairing. There
is a busy road nearby which leads into the city. The city is 10 kilometres away.
Kolo’s friend, Leslie, owns a garage in another city. Leslie has given Kolo the following information from
his company accounts. This is shown in Appendix 1.
Appendix 1
2010 2011
Appendix 2
To: [email protected]
From: [email protected]
Hello Kolo
If you are thinking of importing cars for your business you need to consider a few things.
Changes in the exchange rate may affect the price you are paying for the imported cars. Also you need
to check if there are any tariffs or quotas on imported cars. However, the prices are often 20% less than
buying cars in this country and there are more types and models of cars available from other countries.
Remember transport costs may be higher and delivery dates may be less reliable.
Good luck!
Leslie
Appendix 3
Economic data
8 6
7 5
6
4
% 5 %
4 3
3 2
2
1 1
0 0
2009 2010 2011 2012 2009 2010 2011 2012
(forecast) (forecast)
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
Total
DC (NF) 49271/2
© UCLES 2012 [Turn over
2
1 (a) Identify and explain four reasons why Kolo might want to set up his own business rather For
than work for an employer. Examiner’s
Use
Reason 1: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 3: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Reason 4: ........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) Kolo will need money to finance the stock of parts used in car repairs. Consider the For
advantages and disadvantages of the following options for raising finance. Recommend Examiner’s
which option he should choose. Justify your choice. Use
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
Recommendation: ............................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]
2 (a) Kolo wants to get information about his competitors. Identify and explain four ways Kolo For
could research this information. Examiner’s
Use
Way 1: ..............................................................................................................................
Explanation: .....................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
Way 2: ..............................................................................................................................
Explanation: .....................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
Way 3: ..............................................................................................................................
Explanation: .....................................................................................................................
…………… ........................................................................................................................
…………… ........................................................................................................................
Way 4: ..............................................................................................................................
Explanation: .....................................................................................................................
…………… ........................................................................................................................
(b) Kolo plans to promote his new business. Consider the advantages and disadvantages For
of the following methods of promotion. Recommend which method he should choose. Examiner’s
Justify your choice. Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Free car repairs for a year with every car purchase: ........................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]
3 (a) Kolo needs to buy parts to repair cars. He plans to buy these parts directly from large For
manufacturers. Identify and explain one advantage and one disadvantage for a small Examiner’s
business of buying from large companies. Use
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) There are three possible sites for the new garage. Consider the advantages and For
disadvantages of each site. Recommend which site Kolo should choose. Justify your Examiner’s
choice. Use
Site A: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Site B: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Site C: ..............................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]
4 (a) Explain how the economic data from Appendix 3 could affect the success of Kolo’s new For
garage. Examiner’s
Use
Unemployment: ................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) Do you think Leslie should be satisfied with the financial position of his business? Justify For
your answer using profitability ratios calculated from the information in Appendix 1. Examiner’s
Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Conclusion: ......................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]
5 (a) Kolo plans to use different methods of payment for mechanics (car repair workers) For
and sales staff. Identify and explain a suitable method of payment for mechanics and a Examiner’s
suitable method of payment for sales staff. Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..................................................................................................................................... [8]
(b) Kolo is considering importing some of the cars he wants to sell. Consider three For
problems Kolo could have if he imports cars. Recommend whether Kolo should import Examiner’s
cars. Justify your answer. Use
Problem 1: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 2: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Problem 3: ........................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
................................................................................................................................... [12]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2012 series for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level
components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – October/November 2012 0450 21
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer and the senior examiners should be consulted if further guidance is
required.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) Identify and explain four reasons why Kolo might want to set up his own business
rather than work for an employer. [8]
Content:
Candidates may focus either on reasons for leaving current employment or the benefits of
running his own business.
• own boss
• keep all the profit
• choose who to work with
• choose own holidays
• choose own working hours
• making all the decisions
• being in control
• no risk of disagreements
• unhappy with current employment
• potential to earn higher income
• not worried about being fired.
The marks available for this question are as follows: 4 marks for knowledge and 4 marks for
explanation/analysis.
Reason: Kolo can keep all the profits for himself (1 knowledge mark)
Explanation: Kolo can keep all the profits for himself (1) he will not be just paid the same
wage if he works hard but he will get to keep extra money for himself. (1 additional mark for
simple explanation)
(b) Kolo will need money to finance the stock of parts used in car repairs. Consider the
advantages and disadvantages of the following options for raising finance.
Recommend which option he should choose. Justify your choice. [12]
Content:
Trade credit is interest free borrowing but may be difficult to obtain.
Owner’s savings do not require any interest payment and accessible straight away but
limited funds.
Bank overdraft is quite easy to arrange but has interest payments and is repayable on
demand.
Level 2 E.g. Trade credit is interest free as suppliers provide the car parts and then receive
payment at a later date. This means the business can obtain the parts, fit these
parts on customers’ cars and receive customer payment before they have to pay for
the parts and so cash flow can be improved.
5 marks for a level 2 answer plus 1 application mark for mentioning customers’ cars.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer, i.e. two level two answers = 6 marks, 3 level 2 answers = 7 marks, 4 level 2
answers = 8 marks. However, if the level 2 answer is very well explained then 6
marks can be awarded for the first level 2 answer. If the second level 2 answer was
also well very explained then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least two level 2 answers plus consideration of which
option to choose and justification in comparison to the other two alternatives.
cars; car repairs; stock of car parts; mechanic; car servicing; sole trader; unlimited liability;
new business; garage; workshops; reference to figures in the case or Appendix 1 or 3.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
2 (a) Kolo wants to get information about his competitors. Identify and explain four ways
Kolo could research this information. [8]
Content:
• questionnaires of competitors’ customers
• interviews of competitors’ customers
• company report
• internet/business website
• observation
• trade journals
• newspapers.
The marks available for this question are as follows: 4 marks for knowledge and 4 marks for
application/explanation
Way: They could carry out a questionnaire of the customers’ opinions of its
competitors.
(1 knowledge mark)
Explanation: They could carry out a questionnaire of the customers’ opinions of its
competitors (1) this would be to find out if they are happy with the car
repairs and if the repairs are carried out quickly. (1 additional mark for
explanation)
(b) Kolo plans to promote his new business. Consider the advantages and disadvantages
of the following methods of promotion. Recommend which method he should choose.
Justify your choice. [12]
Content:
Advertising in local newspapers – low cost, reaches target market; may not be read by
everyone.
Free car repairs for a year with every car purchase – costs money for free repairs; attracts
new customers to try the service.
Offering price reductions to the first 100 customers – attracts new customers to try garage
services; costs money to offer price reductions.
Level 1 E.g. Offering price reductions to the first 100 customers – attracts new customers to
try garage services. 1 mark for each statement.
Level 2 E.g. Offering price reductions to the first 100 customers – attracts new customers to
try garage services as they want to get the service at a low price. If they like the car
service then they may become regular customers of the garage and may even
improve the reputation of the garage by telling their friends. 5 marks for a level 2
answer plus 1 application mark for mentioning car servicing and regular customers
of the garage.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer, i.e. two level two answers = 6 marks, 3 level 2 answers = 7 marks, 4 level 2
answers = 8 marks. However, if the level 2 answer is very well explained then 6
marks can be awarded for the first level 2 answer. If the second level 2 answer was
also well very explained then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least two level 2 answers plus consideration of which
option to choose and justification of why it is better than the other two methods.
car; car repairs; mechanic; car servicing; sole trader; new business; business customers
and private customers; garage; near city centre; workshop; car showroom; reference to
figures in the case or Appendix 1 or 3.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
3 (a) Kolo needs to buy parts to repair cars. He plans to buy these parts directly from large
manufacturers. Identify and explain one advantage and one disadvantage for a small
business of buying from large companies. [8]
Content:
Advantages buy direct from manufacturer so cheaper/wholesaler not necessary; get
advice; technical support; range of products; free delivery; large supplier
benefits from economies of scale so lower prices.
The marks available for this question are as follows: 2 marks for advantage/disadvantage; 2
marks for application and 4 marks for explanation/analysis.
car; car repairs; car parts; mechanic; car servicing; sole trader; business customers and
private customers; garage; workshop; car showroom; importing cars; reference to figures in
the case or Appendix 1 or 3.
There may be other examples in context which have not been included here.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
Simple explanation: Dictated to by large manufacturer (1) as the repair business only
buys a small amount of parts and so it is not that important to the
large manufacturer. (1 additional mark for simple explanation)
Developed explanation: Dictated to by large manufacturer (1) as the repair business only
buys a small amount of parts and so it is not that important to the
large manufacturer (1). The large parts manufacturer will not need
to keep the customer happy as Kolo does not have an alternative
of where to buy the car parts from. (1 further explanation mark for
a developed explanation)
(b) There are three possible sites for the new garage. Consider the advantages and
disadvantages of each site. Recommend which site Kolo should choose. Justify your
choice. [12]
Content:
Site A: passing traffic; easily seen; high rent; small workshop so not much room;
competition in area; no private customers nearby but there are business customers.
Site B: not much passing traffic; many private consumers in area but no business
customers; no competition nearby; lower rent; large showroom so plenty of space.
Site C: no private or business customers nearby; land is for purchase and not rent so no
future rent and is cheap to buy; costly repairs required; plenty of space; on main
road into the city.
NB Direct copying from the insert should not be rewarded for level marks – the
advantages or disadvantages should be made clear and could be a rewording of the
information. But Application marks can be awarded for direct use of figures from the
case.
Level 1 E.g. Site A has a lot of passing traffic. 1 mark for each statement.
Level 2 E.g. Site A has a lot of passing traffic means that many people will see the garage
and might stop and use it. It will mean that car drivers will see the garage and this
will reduce the need to advertise car servicing and therefore reduce costs. 5 marks
for level 2 answer plus an application mark for mentioning car servicing.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer, i.e. two level two answers = 6 marks, 3 level 2 answers = 7 marks, 4 level 2
answers = 8 marks.
Level 3 Detailed discussion of at least two level 2 answers plus consideration of which site
to choose and justification of why it is better than the other two sites.
cars; car repairs; mechanic; car servicing; sole trader; business customers and private
customers; garage; near city centre; workshop; car showroom; no houses nearby; buildings
need repair; two experienced sales staff; importing cars; reference to figures in the case or
Appendix 1 or 3.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
4 (a) Explain how the economic data from Appendix 3 could affect the success of Kolo’s
new garage. [8]
Content:
Unemployment increasing – less income and so less sales; lower wages as more
unemployed; easier to recruit/more choice of applicants.
Economic growth – falling growth and so sales might fall; more sales of used cars as fewer
new cars sold; more repairs as fewer new cars sold and keep old car for longer. (Do not
reward bankruptcy or recession.)
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application and 4 marks for explanation/analysis.
1 knowledge mark + up to 2 explanation marks + 1 application mark for each economic factor
(4 marks × 2 economic factors)
unemployment increasing; economic growth at lower levels; car; car repairs; mechanic; car
servicing; sole trader; new business; business customers and private customers; garage;
importing cars; reference to figures in the case or Appendix 1 or 3.
There may be other examples in context which have not been included here.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
Simple explanation: Unemployment increasing and so sales may be lower (1) due to
consumers having less income as the may have lost their job. (1
additional mark for simple explanation)
Developed explanation: Unemployment increasing and so sales may be lower (1) due to
consumers having less income as they may have lost their job (1).
So they spend less money buying new cars or they may spend
more money getting their old car repaired and so revenue from car
repairs might go up. (1 further explanation mark for a developed
explanation)
(b) Do you think Leslie should be satisfied with the financial position of his business?
Justify your answer using profitability ratios calculated from the information in
Appendix 1. [12]
Content:
Level 1 Sales revenue has increased; expenses have increased; cost of sales has
increased; capital employed has stayed the same.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer, i.e. two level 2 answers = 6 marks, 3 level 2 answers = 7 marks, 4 level 2
answers = 8 marks.
Level 3 This will include at least two different ratios with comparison on the figures and
judgement explained as to whether the business is in a strong financial position or
not.
Knowledge/Application/Analysis/Evaluation
5 (a) Kolo plans to use different methods of payment for mechanics (car repair workers)
and sales staff. Identify and explain a suitable method of payment for mechanics and a
suitable method of payment for sales staff. [8]
Content:
Mechanic: wage/time rate/piece rate
Sales staff: commission/bonus/salary/profit sharing
car; car repairs; car servicing; mechanics; car sales staff; sole trader; garage; workshop; car
showroom; reference to figures in the case or Appendix 1 or 3.
There may be other examples in context which have not been included here.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
Simple explanation: Pay the mechanic a wage (1) as this can be calculated by how
much per hour he gets paid times how many hours he works. (1
additional mark for simple explanation)
Developed explanation: Pay the mechanic a wage (1) as this can be calculated by how
much per hour he gets paid times how many hours he works (1).
This is a simple way of paying the mechanic as it is difficult to
measure his productivity and therefore pay him by how many cars
he repairs. (1 further explanation mark for a developed
explanation)
(b) Kolo is considering importing some of the cars he wants to sell. Consider three
problems Kolo could have if he imports cars. Recommend whether Kolo should import
cars. Justify your answer. [12]
Content:
Exchange rate changes: make costs difficult to calculate
Tariffs: increase the cost of imported cars
Quotas: restricted number of cars
Higher transport costs: as it is further to transport the cars
Longer delivery time: further to transport
Increased risk of non-payment: as the business is not known to the buyer
Language difficulties: communication problems with supplier
Level 1 E.g. The exchange rate might change. 1 mark for each statement.
Level 2 E.g. The exchange rate might change and if it goes down then imported cars will be
more expensive to import making it harder for Kolo to sell cars to customers. 5
marks for level 2 answer.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer, i.e. two level two answers = 6 marks, 3 level 2 answers = 7 marks, 4 level 2
answers = 8 marks. However, if the level 2 answer is very well explained then 6
marks can be awarded for the first level 2 answer. If the second level 2 answer was
also well very explained then 8 marks in total can be awarded.
Level 3 This will include at least two problems at level 2 and judgement explained as to
whether the business should import used cars or not.
cars; car repairs; 20% decrease in price; car servicing; business customers and private
customers; garage; car showroom; importing cars; reference to Appendix 2.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
DC (NF) 63413/2
© UCLES 2013 [Turn over
2
1 Earnshaw is a company that buys raw materials and components in bulk. It uses them to For
manufacture furniture using flow production methods. Productivity in the factory is high. Examiner’s
Currently Earnshaw has high costs of holding stock. The Managing Director wants to Use
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Advantage 1: ....................................................................................................................
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Advantage 2: ....................................................................................................................
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Feature 1:..........................................................................................................................
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Explanation: .....................................................................................................................
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Feature 2: .........................................................................................................................
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Explanation: .....................................................................................................................
..................................................................................................................................... [4]
(d) Identify and explain three benefits to Earnshaw of using lean production methods. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
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Benefit 2: ..........................................................................................................................
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Explanation: .....................................................................................................................
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Benefit 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..................................................................................................................................... [6]
(e) ‘If Earnshaw is to grow in the future then its unit production costs must fall’.
Do you agree? Justify your answer.
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2 Muammar sells boxes of spices to markets. Workers in Muammar’s business are paid on a For
piece rate basis. Table 1 gives financial details of the business in 2012. Examiner’s
Use
Table 1
Example 1: .......................................................................................................................
(b) Identify two reasons why sales may vary from month to month.
Reason 1: ........................................................................................................................
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Reason 2: ........................................................................................................................
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(d) Identify and explain one advantage and one disadvantage to Muammar of using piece For
rate to pay his workers. Examiner’s
Use
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Disadvantage: ..................................................................................................................
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Explanation: .....................................................................................................................
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..................................................................................................................................... [6]
(e) Muammar is planning to change the selling price of the boxes to $7 each. Do you think
this change would benefit the business? Justify your answer.
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3 Yura is the Managing Director of a company that sells holidays. The company organises For
hotels, air flights and car hire for customers. For the first time, the company is going to do Examiner’s
some market research. Secondary sources will be used and a sample of customers will be Use
..........................................................................................................................................
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..................................................................................................................................... [2]
Advantage 1: ....................................................................................................................
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Advantage 2: ....................................................................................................................
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(c) Identify and explain two methods of sampling that the company could use.
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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..........................................................................................................................................
Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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..................................................................................................................................... [4]
(d) Identify and explain two ways of segmenting the market for holidays that the company For
could use. Examiner’s
Use
Way 1: ..............................................................................................................................
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Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
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Explanation: .....................................................................................................................
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(e) Yura believes that the price is the most important part of the marketing mix for holidays.
Do you think that he is correct? Justify your answer.
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National income
Year per person ($) Inflation (%) Unemployment (%)
2010 650 5 10
2011 640 3 12
2012 600 1.5 18
The economy of country C is in recession. The Government wants to create more jobs by
encouraging more businesses to start up. However some pressure groups are against this
because they think that more businesses will cause more external (social) costs.
..........................................................................................................................................
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..................................................................................................................................... [2]
(b) Identify two possible reasons why national income per person has fallen between 2010
and 2012.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Reason 2: ........................................................................................................................
..................................................................................................................................... [2]
(c) Identify and explain two ways that a Government could help new businesses to start up.
Way 1: ..............................................................................................................................
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Explanation: .....................................................................................................................
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Way 2: ..............................................................................................................................
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Explanation: .....................................................................................................................
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(d) Identify and explain three external (social) costs that might be caused by an increase in For
the number of businesses in country C. Examiner’s
Use
Cost 1: .............................................................................................................................
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Explanation: .....................................................................................................................
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Cost 2: .............................................................................................................................
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Explanation: .....................................................................................................................
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Cost 3: .............................................................................................................................
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Explanation: .....................................................................................................................
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(e) Do you think that new start-up businesses can be successful in country C? Justify your
answer.
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5 Dmit is a partner in a small retail clothing business. The business has been successful, but it For
is finding it difficult to compete against larger retailers. The partners are thinking of converting Examiner’s
the partnership into a private limited company. Use
Feature 1: .........................................................................................................................
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Feature 2: .........................................................................................................................
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Way 1: ..............................................................................................................................
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Way 2: ..............................................................................................................................
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(c) Identify and explain two reasons why the business might be finding it difficult to compete
against larger retailers.
Reason 1: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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(d) Identify and explain three methods of promotion that the partnership could use to For
increase sales. Examiner’s
Use
Method 1: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
Explanation: .....................................................................................................................
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(e) Consider the advantages and disadvantages of converting the partnership into a private
limited company. Recommend whether the partners should do this. Justify your answer.
Advantages: .....................................................................................................................
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Disadvantages: ................................................................................................................
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Recommendation: ............................................................................................................
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..................................................................................................................................... [6]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2013 series for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level
components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – October/November 2013 0450 11
Clear understanding [2] e.g. Productivity measures the amount of output that can be
produced from a given amount of resource inputs
Do not credit an answer that simply focuses on output alone e.g. shows the output of a
business in a year.
(b) Identify two advantages to Earnshaw of buying raw materials in bulk. [2]
Note – Do not accept motivation as an identified feature of flow production. This may be
explained as a consequence of one of the identified features.
(d) Identify and explain three benefits to Earnshaw of using lean production methods.
[6]
Analysis [3 × 1] – award 1 mark for each relevant explanation i.e. why the points identified
generate benefits to the company
(e) ‘If Earnshaw is to grow in the future then its unit production costs must fall’. Do you
agree? Justify your answer. [6]
Evaluation [2] – reasoned judgment made as to whether unit costs must fall as business
grows in future.
Developed answer:
As a business grows it should benefit from economies of scale [k]. This, therefore would
mean the business can lower prices [k] which may encourage greater sales [an].Therefore
falling unit costs allow a business to grow. [ev] However, even if unit costs fall the business
may not be able to grow because the marketing for the business may be poor or there may
be increased competition [an] and this may restrict growth. [ev]
2 (a) Identify two examples of fixed costs for Muammar’s business. [2]
(b) Identify two reasons why sales may vary from month to month. [2]
Points include:
• nature of product
• seasonal reasons
• increased competition
• consumer tastes/fashion changes
• changes to marketing
• prices may have varied
Note – Do not accept ‘demand varies’ as a reason on its own because this is implicit in the
question. Answers need to give a reason as to why demand varies.
(c) Calculate the annual profit that Muammar made in 2012. [4]
Note: If the correct figure of 96 000 is not given, up to a maximum of 3 marks may be
awarded.
• A candidate who gives the figure 9 600 has clearly calculated correctly but made one
error and should therefore be awarded 3 marks.
• Calculation of variable costs plus calculation of total costs gains only 2 marks
• Credit calculation using contribution method as follows: contribution is $2 [1] total
monthly contribution $18 000 [+1] monthly profit $8 000 [+1]
• Own figure rule (OFR) applies up to a maximum of 3 marks if only one error carried
forward.
If NO acceptable calculations allow 1 mark for understanding of profit [k] e.g. total revenue
– total cost [1]
(d) Identify and explain one advantage and one disadvantage to Muammar of using piece
rate to pay his workers. [6]
Knowledge [2 × 1] – award 1 mark for the advantage and 1 mark for the disadvantage
Analysis [2 × 2] – award 1 mark for analysis of impact [1] plus a further mark for showing
how it might be a benefit or not to the business
(e) Muammar is planning to change the selling price of the boxes to $7 each. Do you think
this change would benefit the business? Justify your answer. [6]
Analysis [2] – award up to 2 marks for explanations which explain how or why it might be an
issue. Accept calculation of relevant figures as analysis but this is not essential.
Evaluation [2] – reasoned judgement made as to whether the change in price will benefit
this business.
Note – 1 knowledge point that is very well developed could gain 3 marks [1 k + 2 an]
Developed answer:
The price cut should increase volume of sales [k]. However the reduction would reduce the
profit margin per unit [k]. The impact on break-even would be to raise it from 5 000 units per
month to 10 000[an]. At present sales volume is 9 000 per month, which would be below the
new break-even point [an]. Whether it would benefit the business would depend on how
much the firm could increase production [ev] and how much sales rise [ev].
Clear understanding [2]: e.g. process of finding out what consumers want or need before a
product is made. Or process of collecting, analysing and interpreting of information about the
market.
Do NOT accept examples of primary or secondary research alone, these are only acceptable
as a development point.
(c) Identify and explain two methods of sampling that the company could use. [4]
Application/analysis [2 × 1] – award 1 mark for each relevant explanation i.e. showing what
each method involves or how it is carried out.
(d) Identify and explain two ways of segmenting the market for holidays that the company
could use. [6]
Analysis [2 × 1] – award 1 mark for relevant explanation i.e. shows how this grouping would
operate
(e) Yura believes that the price is the most important part of the marketing mix for
holidays. Do you think he is correct? Justify your answer. [6]
Evaluation [2] – reasoned judgement made as to whether price is the most important part of
the marketing mix for holidays. This might involve considering whether one element is more
important than another.
For six marks there must be some reference to whether price is the most important factor.
Points might include:
• Price can help attract consumer [k]
• Price is only one element of the marketing mix [k]
• If the holiday does not appeal to customers [k] no-one would buy the holiday [an]
• Identification of other elements of the marketing mix [k]
Developed answer:
Price helps to attract consumers [k]. If the price is too high customers may go to a competitor
[an]. However, even if a holiday is cheap if the destination is unappealing [k] it will not sell
[an]. So price is an important element but not the only factor [ev]. The most important factor
depends upon the personal situation of the customer [ev].
Clear understanding [2] – a sustained (over a period of time) reduction in national income/
output.
Some understanding [1] – ‘fall in output’ or ‘fall in national income’ or identifying the effects
of recession alone e.g. high unemployment.
Note: without some reference to ‘sustained’ or ‘over time’, reduction in national income as the
answer would only gain 1 mark. An answer which identifies only the effects of a recession
even with a sustained time period gains only 1 mark.
(b) Identify two possible reasons why national income per person has fallen between 2010
and 2012. [2]
Note: Do not accept wages by individual businesses as the question relates to national
income.
(c) Identify and explain two ways that a Government could help new businesses to start
up. [4]
Analysis [2 × 1] – award 1 mark for each relevant explanation (i.e. show how the methods
would help encourage a start-up).
(d) Identify and explain three external (social) costs that might be caused by an increase
in the number of businesses in country C. [6]
Application/analysis [3 × 1] – award 1 mark for each relevant explanation (i.e. show how
the cost is created by an increase in the number of businesses
Note – Different types of pollution can only be awarded only once. [k]
(e) Do you think that new start-up businesses can be successful in country C? Justify
your answer. [6]
Analysis [2] – award up to 2 marks for relevant explanation e.g. developing the issues or
interpreting their meaning
Evaluation [2] – reasoned judgement made as to whether new start-up businesses can be
successful in country C
Developed answer:
New businesses will be successful if they can provide goods and services that are needed by
consumers [k]. Since the economy is facing falling GDP per head customers may not buy
new products [an]. Unemployment is rising [k] so it will be more difficult to set a price that
people can afford [an]. Whether new businesses can be successful depends on a range of
factors, not all of which a business can control [ev]. This is a particular problem in a country
that is going through a recession [ev].
(c) Identify and explain two reasons why the business might be finding it difficult to
compete against larger retailers. [4]
Application [2 × 1] – award 1 mark for each relevant explanation (i.e. show why these points
make it difficult to compete against larger businesses)
(d) Identify and explain three methods of promotion that the partnership could use to
increase sales. [6]
Application/analysis [3 × 1] – award 1 mark for each relevant explanation (i.e. show how
the methods identified help increase sales.
(e) Consider the advantages and disadvantages of converting the partnership into a
private limited company. Recommend whether the partners should do this. Justify
your answer. [6]
Analysis [2] – award up to 2 marks for relevant explanations (e.g. discussion of points
considering their implication for the partnership)
Evaluation [2] – reasoned judgement made as to whether partners should convert the
business into a private limited company
Note: A one-sided answer, which considers only advantages or disadvantages, can gain a
maximum of three marks, if there is a reasoned decision.
DC (AC/JG) 63416/1
© UCLES 2013 [Turn over
2
Three years ago Shahila started a food stall called Yum Yum Food. She is a sole trader. The stall sells
hot food and is located in the centre of the capital city. This area has a lot of customers from local
workers and shoppers, as well as tourists. The business has many competitors in the area, but Shahila
has still made a good profit each year.
Shahila works many hours each day. She has three employees to help her serve customers and
prepare food. Shahila only buys high quality food ingredients, which are currently purchased from a
nearby wholesaler.
She wants to expand the business and has the following two options.
Option 1
Start up another food stall near the main football stadium. There is one football match each week when
many thousands of supporters come to the stadium. Forecasted customers are 500 per week and each
is forecast to spend an average of $2.
Option 2
Open a café (restaurant) in the city centre. Forecasted customers per week are 800 and each is
forecast to spend an average of $5.
Appendix 1
Forecast cost information per week ($)
Option 1 Option 2
Rent 50 1500
Wage costs 100 500
Food ingredient costs 300 1000
Local tax/licence 100 250
Appendix 2
Appendix 3
The football stadium in the capital city is to be used for other events. The football club has agreed to
rent out the stadium to be used for concerts and other sporting events. This should make better use of
the stadium which is currently only used for one football match each week.
It is predicted that the stadium will be used for an extra two or three events each week, even when the
football season has finished.
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
DC (AC) 63415/3
© UCLES 2013 [Turn over
2
1 (a) Identify and explain two possible reasons why Shahila wants to expand her business. For
Examiner’s
Reason 1: ........................................................................................................................ Use
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Explanation: .....................................................................................................................
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(b) If the business expands, Shahila will need to buy more food ingredients. Consider the For
advantages and disadvantages of buying from a wholesaler or buying directly from local Examiner’s
farmers. Recommend which option she should choose. Justify your answer. Use
Wholesaler: ......................................................................................................................
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2 (a) Identify and explain two reasons why Shahila wants good quality food products to be For
served from her stall. Examiner’s
Use
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Explanation: .....................................................................................................................
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(b) Shahila plans to promote her food stall. Consider the advantages and disadvantages of For
the following three methods of promotion. Recommend which one she should choose. Examiner’s
Justify your choice. Use
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3 (a) Identify and explain two reasons why Shahila will have to pay a higher rent for a café in For
the centre of the city. Examiner’s
Use
Reason 1: ........................................................................................................................
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Explanation: .....................................................................................................................
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Reason 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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(b) Consider the two options for expanding the business. Recommend which option Shahila For
should choose. Justify your choice by calculating the net profit per week for each option. Examiner’s
Use
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4 (a) If Shahila chooses Option 2, then she will have to decide on the café opening hours. For
Identify and explain four factors which will affect the opening hours she chooses. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
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Factor 4: ...........................................................................................................................
Explanation: .....................................................................................................................
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(b) Shahila will need to employ more workers if the business expands. Consider the For
advantages and disadvantages of the following methods of payment. Recommend Examiner’s
which method she should choose. Justify your answer. Use
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5 (a) Identify and explain two benefits to Shahila of keeping a short chain of command as the For
business expands. Examiner’s
Use
Benefit 1: ..........................................................................................................................
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Explanation: .....................................................................................................................
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Benefit 2: ..........................................................................................................................
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Explanation: .....................................................................................................................
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(b) The following three factors affect the success of Yum Yum Food. For each of the factors For
explain how sales are affected. Which factor do you think is likely to affect sales the Examiner’s
most? Justify your answer. Use
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BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2013 series for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level
components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – October/November 2013 0450 21
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer and the senior examiners should be consulted if further guidance is
required.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) Identify and explain two possible reasons why Shahila wants to expand her business.
[8]
Content:
• increase profit
• increase sales
• to increase market share
• brand loyalty/reputation
• spread risks
• diversification
• economies of scale
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each reason identified (2 marks max). Up to two further marks are available for
explaining the reason. 2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
Possible application marks: food stall; café; meals; sole trader; hot food; shoppers/tourists;
high quality food ingredients; vegetables; wholesaler; football stadium; concerts/other
sporting events; financial information from Appendix 1.
There may be other examples in context which have not been included here.
Developed explanation: To gain more profit (1) by selling more food either through another
food stall or by opening a café to increase sales revenue (1). As the
business is larger the costs may not increase in the same proportion
as sales revenue and therefore profit will increase (1).
(b) If the business expands, Shahila will need to buy more food ingredients. Consider the
advantages and disadvantages of buying from a wholesaler or buying directly from
local farmers. Recommend which option she should choose. Justify your answer. [12]
Content:
Advantages Disadvantages
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. Shahila can buy the food ingredients in small quantities from the wholesaler
and will not need to store a lot of fresh vegetables which could go bad and be a
waste of money. 5 marks for level 2 answer plus 1 application mark for mentioning
fresh vegetables.
Level 3 – Detailed discussion of two × level 2 answers and then a recommendation at the
end which justifies which is the best option to choose and why the other option is
less suitable.
Possible application marks: wholesaler is nearby; food stall; café; meals; sole trader; fresh
food; vegetables; financial information from Appendix 1.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
2 (a) Identify and explain two reasons why Shahila wants good quality food products to be
served from her stall. [8]
Content:
• good reputation
• repeat sales
• not be prosecuted
• more competitive
• charge a higher price
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each reason identified (2 marks max). Up to two further marks are available for
explaining each reason. 2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
Possible application marks: many competitors in the area; food stall; café; meals; sole
trader; hot food; shoppers/tourists; high quality food ingredients; vegetables; football
stadium; concerts/other sporting events.
There may be other examples in context which have not been included here.
Developed explanation: To gain repeat food sales (1) as customers will be happy with good
quality food and be willing to keep coming back to buy food from the
stall (1). They may tell friends and these may also come to the stall
and this will increase sales and also profits (1).
(b) Shahila plans to promote her food stall. Consider the advantages and disadvantages
of the following three methods of promotion. Recommend which one she should
choose. Justify your choice. [12]
Content:
Advantages Disadvantages
Giving out • encourages customers to come • sales revenue lost from the free
discount with a friend meal
vouchers • come back to use the voucher • cost of producing the meal
• image of poor quality food
Posters in • seen by some of the target • may not be seen by the rest of
local hotels market the target population
• may attract new people who • cost of printing and displaying
haven’t heard about the stall the poster
• the poster may be disfigured
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. Competitions encourage customers to try their food so that they will be
entered into the competition. However, Shahila will need to pay for a prize and this
will need to be an expensive prize or it will not encourage customers to buy meals
and it raises the business costs. 5 marks for level 2 answer plus 1 application mark
for mentioning meals.
Level 3 – Detailed discussion of two × level 2 answers and then a recommendation at the
end which justifies which is the best method of promotion to choose and why the
other ways are less suitable.
Possible application marks: food; meals; sole trader; hot food; shoppers/tourists; high
quality food ingredients; vegetables; concerts.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
3 (a) Identify and explain two reasons why Shahila will have to pay a higher rent for a café
in the centre of the city. [8]
Content:
• high demand for premises
• higher cost of purchasing the building by the landlord
• café premises more expensive than a food stall
• higher footfall (more customers in the area)
• more competitors in the area therefore more customers
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each reason identified (2 marks max). Up to two further marks are available for
explaining each reason. 2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
Possible application marks: food stall; meals; sole trader; hot food; shoppers/tourists; high
quality food ingredients; local tax/licence.
There may be other examples in context which have not been included here.
Simple explanation: High demand for rental properties in city centres (1 mark for
knowledge).
Developed explanation: Demand for rental properties (1) is higher for city centre sites as the
areas have a lot of passing trade and therefore the cafes are likely
to have more customers (1). With so many customers food sales will
be high and therefore the owners of cafés will make a good profit
(1).
(b) Consider the two options for expanding the business. Recommend which option
Shahila should choose. Justify your choice by calculating the net profit per week for
each option. [12]
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. The net profit for option 1 is $450 per week. 5 marks for each level 2 answer
calculating net profit for each option.
Level 3 – Detailed discussion of at least three level 2 answers and then a recommendation
at the end which justifies which option to choose and why not the other option.
Knowledge/Application/Analysis/Evaluation
4 (a) If Shahila chooses Option 2, then she will have to decide on the café opening hours.
Identify and explain four factors which will affect the opening hours she chooses. [8]
Content:
• law
• competitors’ opening hours
• shoppers
• work patterns
• availability of employees
• cost of opening hours
1 mark for each factor identified (4 marks max). Up to one further mark is available for
explaining/applying the factor.
E.g. The law (1) as the government has set laws which state when businesses can open a
café and how many hours it can remain open. (1)
(b) Shahila will need to employ more workers if the business expands. Consider the
advantages and disadvantages of the following methods of payment. Recommend
which method she should choose. Justify your answer. [12]
Content:
Advantages Disadvantages
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. If workers are paid for each customer served then they will try to serve a lot of
customers. If the employees give good customer service then this might increase
the number of customers, increase sales revenue from meals sold and also
increase profit. 5 marks for level 2 answer plus 1 application mark for mentioning
meals.
Level 3 – Detailed discussion of two × level 2 answers and then a recommendation at the
end which justifies which is the best method of payment to use and why the other
methods are less suitable.
Possible application marks: food stall; café; meals; sole trader; hot food; shoppers/tourists;
football stadium; concerts/other sporting events; financial information from Appendix 1.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
5 (a) Identify and explain two benefits to Shahila of keeping a short chain of command as
the business expands. [8]
Content:
• communication is quicker
• manager is less remote
• span of control will be wider therefore more delegation
• more direct control of employees
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each benefit identified (2 marks max). Up to two further marks are available for
explaining the benefit to Shahila. 2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
There may be other examples in context which have not been included here.
Simple explanation: Span of control will be wider therefore more delegation (1 mark for
knowledge).
Developed explanation: Span of control will be wider therefore more delegation (1).
Employees will have more varied jobs to do and therefore they will
be more motivated (1) and less likely to leave their job making food
at the food stall (1).
(b) The following three factors affect the success of Yum Yum Food. For each of the
factors explain how sales are affected. Which factor do you think is likely to affect
sales the most? Justify your answer. [12]
Content:
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. If unemployment increases then it will be easier to recruit new staff. It also
means that there will be less pressure on wage increases and so Yum Yum may
be able to pay lower wages to new staff and hence reduce their costs of meals
thus increasing sales. 5 marks for level 2 answer plus 1 application mark for
mentioning meals.
Level 3 – Detailed discussion of two × level 2 answers and then a conclusion at the end
which justifies which affects sales the most and why the other factors are less
important.
Possible application marks: food stall; café; meals; sole trader; hot food; shoppers/tourists;
high quality food ingredients; vegetables; football stadium; concerts/other sporting events;
financial information from Appendix 1.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
DC (AC) 63116/2
© UCLES 2013 [Turn over
2
1 Kew Construction is a public limited company. It specialises in building large houses. Each For
house costs $30 000 to build and the company adds 40% to total cost to calculate the selling Examiner’s
price. Last year sales fell by $90m and dividends were reduced. The Human Resources Use
Director is worried: ‘If sales do not improve, I will need to make some workers redundant.
How can I decide which workers to make redundant?’
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(c) Identify and explain two disadvantages to a business of being a public limited company.
Disadvantage 1: ...............................................................................................................
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Explanation: ......................................................................................................................
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Disadvantage 2: ...............................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain three methods that Kew Construction could use to improve its level For
of sales. Examiner’s
Use
Method 1: .........................................................................................................................
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Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
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Method 3: .........................................................................................................................
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(e) What do you think are the most important factors for the Human Resources Director to
consider when selecting which workers to make redundant? Justify your answer.
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2 Gayle’s Soaps is a business which manufactures health and beauty products. Its market For
share has remained constant at 15% despite new businesses entering this market. The Examiner’s
business uses market segmentation. Most of its customers are women. The Marketing Use
manager believes the company could increase its profits if it increases the price of each of its
most popular products.
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(b) Identify two ways (other than gender) that Gayle’s Soaps could segment its market.
Way 1: ..............................................................................................................................
(c) Identify and explain two advantages of market segmentation for Gayle’s Soaps.
Advantage 1: ....................................................................................................................
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Explanation: ......................................................................................................................
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Advantage 2: ....................................................................................................................
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Explanation: ......................................................................................................................
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(d) Identify and explain three problems that a business might have when trying to enter a For
new market. Examiner’s
Use
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Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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Problem 3: ........................................................................................................................
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Explanation: .....................................................................................................................
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(e) Do you think that if Gayle’s Soaps decides to increase prices then this will lead to higher
profits? Justify your answer.
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3 Sharma Machine manufactures motorcycles. The company is product orientated. Sharma For
Machine holds a lot of stock. The owner, Ishant, wants to increase productivity. Also the Examiner’s
company plans to open an additional factory to satisfy increased demand. ‘Expansion should Use
mean economies of scale’ said Ishant. ‘The right location for the new factory is going to be
important if the business is to remain competitive.’
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(b) Identify two possible economies of scale the business might benefit from if it expands.
(c) Identify and explain two possible problems for Sharma Machine of holding a lot of stock.
Problem 1: ........................................................................................................................
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Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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(d) Identify and explain three methods that Ishant could use to increase productivity. For
Examiner’s
Method 1: ......................................................................................................................... Use
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Explanation: .....................................................................................................................
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Method 2: .........................................................................................................................
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Explanation: .....................................................................................................................
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Method 3: .........................................................................................................................
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Explanation: .....................................................................................................................
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(e) How important is the right location for the new factory in helping Sharma Machine to
remain competitive? Justify your answer.
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4 Luxury Destinations owns three hotels in country X. The business spends a lot of money For
on staff training. The Finance Director is pleased with the financial position of the business. Examiner’s
‘However, the appreciation of our country’s currency and the Government’s plan to increase Use
2011 2012
Gross profit 195 220
Net profit 30 60
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(c) Identify and explain two problems that an increase in taxes could cause for Luxury
Destinations.
Problem 1: ........................................................................................................................
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Explanation: .....................................................................................................................
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Problem 2: ........................................................................................................................
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Explanation: .....................................................................................................................
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(d) Identify and explain three benefits for Luxury Destinations of training its employees. For
Examiner’s
Benefit 1: .......................................................................................................................... Use
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Explanation: .....................................................................................................................
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Benefit 2: ..........................................................................................................................
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Explanation: .....................................................................................................................
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Benefit 3: ..........................................................................................................................
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Explanation: .....................................................................................................................
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(e) Do you think the Finance Director is right to be pleased with the financial position of the
business? Justify your answer.
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..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
right qualities. All of my team are highly motivated and someone with the wrong management
style might cause problems.’
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) Identify two ways that a business could increase added value.
Way 1: ...............................................................................................................................
..........................................................................................................................................
Way 2: ...............................................................................................................................
...................................................................................................................................... [2]
(c) Identify and explain two advantages of a short chain of command for Amira.
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: ......................................................................................................................
...................................................................................................................................... [4]
(d) Identify and explain three qualities that Amira might look for in a manager. For
Examiner’s
Quality 1: .......................................................................................................................... Use
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Quality 2: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
Quality 3: ..........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
...................................................................................................................................... [6]
(e) Do you think that the management style of the new manager might cause problems?
Justify your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2013 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – May/June 2013 0450 11
This mark scheme includes a summary of appropriate content for answering each question. It should
be emphasised, however, that this material is for illustrative purposes and is not intended to provide a
definitive guide to acceptable answers. It is quite possible that among the scripts there will be some
candidate answers that are not covered directly by the content of this mark scheme. In such cases,
professional judgement should be exercised in assessing the merits of the answer.
Examples of possible answers are also included in this mark scheme. Again, it should be emphasised
that this is for illustrative purposes and the examples chosen represent only some of the many
possible responses that would merit reward.
Good knowledge [2] e.g. Payment to shareholders [1] from profits of a company [+1] Return
to shareholders for investing in the company [2]
Price = cost + mark up [1] ($30 000 × 40%) + 30 000 [1] = $42 000 [2]
Do not credit $12 000 (the calculation of mark up) as it does not answer the question set
(c) Identify and explain two disadvantages to a business of being a public limited
company. [4]
(d) Identify and explain three methods that Kew Construction could use to improve its
level of sales. [6]
Note: Do not accept any answer that could not be related to construction, e.g. packaging
(e) What do you think are the most important factors for the Human Resources Director to
consider when selecting which workers to make redundant? Justify your answer. [6]
Evaluation [2] – justified decision made as to which are the most important factors
Look at what jobs are not needed anymore [k] and could be replaced by more efficient
machinery [an]. They need to see which workers are most productive [k] so that jobs can be
reduced without lowering productivity [an]. The main thing therefore has to be the overall cost
[ev] as they do not want to lose the most profitable workers [ev].
Clear understanding [2] Percentage of the total market sales [1] held by one brand or
business [+1]
(b) Identify two ways (other than gender) that Gayle’s Soaps could segment its market. [2]
Answers might include: age, lifestyle, geographical, income/social class, use – health or beauty
(c) Identify and explain two advantages of market segmentation for Gayle’s Soaps. [4]
Analysis [2 × 1] – award one mark for each relevant explanation (i.e. showing how or why it
might be an advantage for GS)
(d) Identify and explain three problems that a business might have when trying to enter a
new market. [6]
Analysis [3 × 1] – explain how or why it might cause problems for the business
(e) Do you think that if Gayle’s Soaps decides to increase prices then this will lead to
higher profits? Justify your answer. [6]
Application/analysis [2] – for development of points to explain how or why the profits are
affected
Evaluation [2] – justified decision made as to whether increased prices will lead to higher
profits
If the soap was of high quality [k] and the target customers were high income women [k] then
increasing the price would attract them [an] and make them think the soap is of high quality
[an]. So in this case increasing the price will increase the profits [ev] because the higher price
will match the image [ev]
Do not credit answers which discuss factors affecting profits in general with no link to prices
Clear understanding [2] Business that focuses on making the product right [1] and then tries
to find customers to buy it [+1]
(b) Identify two possible economies of scale the business might benefit from if it expands.
[2]
(c) Identify and explain two possible problems for Sharma Machine of holding a lot of
stock. [4]
Note: Do not accept any answer that could not be related to this type of business, e.g. sell
by dates
(d) Identify and explain three methods that Ishant could use to increase productivity. [6]
(e) How important is the right location for the new factory in helping Sharma Machine to
remain competitive? Justify your answer. [6]
Evaluation [2] – justified decision as to how important the right location is help SM remain
competitive
Candidates may discuss a range of factors affecting competitiveness. This is creditable only
if linked to why location is not important.
They should locate in a place which has low rent [k] and easy access to transport links [k].
This will keep costs of production low [an] therefore SM will be able to keep its prices low [an]
and attract more sales. However, location by itself does not mean the business will always
be competitive [ev]. Buying from cheap suppliers may be a better way of keeping costs low
[ev].
Good knowledge/understanding [2]: Rise of exchange rate [2] or the value of the currency
rises/ [1] so it buys more of another currency than before [1]
Do not accept a definition of exchange rate as this is not answering the question
Application [2] e.g. correct answer – 0.666 [2] Also accept 0.66, 0.67, 2:3 or 1:1.5 [2]
(c) Identify and explain two problems that an increase in taxes could cause for Luxury
Destinations. [4]
(d) Identify and explain three benefits for Luxury Destinations of training its employees. [6]
(e) Do you think the Finance Director is right to be pleased with the financial position of
the business? Justify your answer. [6]
Application/Analysis [2] – explanation to show how or why this is an issue for LD.
Interpretation of relevant ratio or manipulation of figures/data to explain what it shows
Evaluation [2] – justified decision made as whether LD should be pleased about the
financial position
The current ratio has decreased [k]. This means they are more at risk of bankruptcy [an].
However, their net profit has doubled [k] which means the company has improved by cutting
their overheads [an]. Although the current ratio is bad they have plenty of fixed assets to
cover their debts [ev] and efficiency has increased therefore the finance director should be
pleased [ev].
Good knowledge [2]: When business activities are owned by individuals [2]
Some knowledge [1] e.g. run by individuals OR not controlled directly by government OR aim
to make a profit OR controlled by person/group of people
(b) Identify two ways that a business could increase added value. [2]
(c) Identify and explain two advantages of a short chain of command for Amira. [4]
(d) Identify and explain three qualities that Amira might look for in a manager. [6]
(e) Do you think that the management style of the new manager might cause problems?
Justify your answer. [6]
Evaluation [2] – justified decision made as whether management style used might cause
problems
An autocratic leadership style [k] would definitely not suit them [ev] as employees may feel
demotivated [an]. However as employees are highly motivated [k] they could adapt to any
leadership style [an] and therefore the management style is not important [ev].
DC (SJF) 63096/3
© UCLES 2013 [Turn over
2
TT is a chain of shops which sell tools such as hammers, screwdrivers, electric drills and saws. The
business was started 20 years ago as a partnership between 2 friends, Ted and Mustafa.
TT has 10 shops. There are 2 shops in each main city in country A. The business has grown by
reinvesting profits and opening a new shop every 2 years. Each shop employs a shop manager and 5
shop assistants. The shops open 10 hours a day for 6 days a week.
Most of TT’s customers are people who are building or repairing their own houses. The tools and
equipment TT sells are cheap but low quality. As a result of this, few building firms and construction
companies buy from TT. Most building firms only buy high quality tools and equipment that will last a
long time.
Appendix 1
Tools and equipment for home and business use – we sell or rent!
Tired of buying tools that you only use a few times? Tired of buying tools which
break after using them a few times? Then here is the answer…. For all your
needs when building or repairing your house come to Ed’s Equipment.
• Rent the tools you need for half the cost of buying them.
• All high quality tools as used by construction companies.
• Tools are reliable and high quality.
• Trade credit is available to business customers.
• Large range of tools in our big shop.
Visit us at our shop on Main Road, New City, 3210997. Telephone: 377228665.
Appendix 2
Cash flow forecast for TT ($000s) for the second half of 2013
Appendix 3
The recent bad weather has caused much damage to buildings in all of the main cities in country A.
Strong winds are unusual at this time of year.
The Government estimates that the repairs will cost several million dollars. Many construction
companies will welcome the increased number of customers, as the economy has been going through
a recession and this has affected the building industry. Several new businesses might set up in the
industry.
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
DC (SJF) 63095/2
© UCLES 2013 [Turn over
2
1 (a) Country A is a market economy where there is little Government regulation. Identify and For
explain one advantage and one disadvantage to TT of trading in this type of economy. Examiner’s
Use
Advantage: .......................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Disadvantage: ..................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) TT has 10 small shops. Consider the advantages and disadvantages of operating For
several small shops rather than 1 large shop. Do you think Ted was right to open Examiner’s
10 small shops rather than 1 large shop? Justify your answer. Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
2 (a) TT buys stock from manufacturers in other countries. Identify and explain two possible For
advantages to TT of importing its stock. Examiner’s
Use
Advantage 1: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Advantage 2: ....................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) Ted and Mustafa want to increase the sales revenue from TT shops. There are three For
options listed below. Consider the advantages and disadvantages of each of these Examiner’s
options and recommend which option you think Ted and Mustafa should choose. Justify Use
your answer.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Start to also sell paint and decorating equipment in the shops: ......................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
3 (a) Ted and Mustafa want to open another shop. Identify and explain four factors they For
should consider when choosing a location for the new shop. Examiner’s
Use
Factor 1: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 2: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 3: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Factor 4: ...........................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
w: ..............................................................................................................................
x: ..............................................................................................................................
y: ..............................................................................................................................
z: ........................................................................................................................... [4]
(ii) Comment on two ways the cash flow position could be improved. Recommend the
best way for Ted and Mustafa to improve the cash flow over the next 6 months.
Justify your answer.
Way 1: .......................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
Way 2: .......................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
Recommendation: ....................................................................................................
..................................................................................................................................
..................................................................................................................................
.............................................................................................................................. [8]
4 (a) Governments can pass laws to protect employees. Identify and explain two ways For
employment laws might benefit employees in TT’s shops. Examiner’s
Use
Way 1: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Way 2: ..............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) The job of shop manager for a new shop will be advertised either in the national For
newspaper, on posters in TT shops or on TT’s website. Consider the advantages and Examiner’s
disadvantages of each of these options to advertise the job. Recommend which option Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
5 (a) Refer to Appendix 3. Identify and explain two possible effects on TT’s business of the For
recent bad weather. Examiner’s
Use
Effect 1: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Effect 2: ............................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [8]
(b) Mustafa wants to leave the partnership next year. Ted is considering three options For
listed below. Consider the advantages and disadvantages of each of these options. Examiner’s
Recommend which option you think Ted should choose. Justify your answer. Use
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
Recommendation: ............................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [12]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2013 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – May/June 2013 0450 21
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer and the senior examiners should be consulted if further guidance is
required.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) Country A is a market economy where there is little Government regulation. Identify
and explain one advantage and one disadvantage to TT of trading in this type of
economy. [8]
Content:
Advantage to TT
freedom to set prices; few laws to restrict business activity; few restrictions,
Disadvantage to TT
highly competitive market; no control over anti-competitive prices; no control over
monopolies; no government grants.
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each advantage/disadvantage identified (2 marks max). Up to two further marks
are available for explaining the advantage/disadvantage. 2 application marks are also
available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
There may be other examples in context which have not been included here.
(b) TT has 10 small shops. Consider the advantages and disadvantages of operating
several small shops rather than 1 large shop. Do you think Ted was right to open 10
small shops rather than 1 large shop? Justify your answer. [12]
Content:
Disadvantage
higher fixed costs; higher distribution costs; increased number of employees;
Disadvantage
further for customers to travel; greater loss if shop has to close;
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to a maximum of 8 marks.
E.g. The manager of a small shop can respond to the needs of local people by
buying tools and equipment which are required by these customers. These
customers can expect to always find what they want at the shop and therefore
become loyal customers and so sales revenue will increase. 5 marks for level
2 answer plus 1 application mark for mentioning tools and equipment.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
2 (a) TT buys stock from manufacturers in other countries. Identify and explain two
possible advantages to TT of importing its stock. [8]
Content:
• lower prices
• higher quality
• wider range
• branded products
• favourable exchange rate
• ethical considerations
The marks available for this question are as follows: 2 marks for knowledge, 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each advantage identified (2 marks max). Up to two further marks are available
for explaining the advantage. 2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
There may be other examples in context which have not been included here.
Simple explanation: The price of imported stock is cheaper. (1 mark for knowledge)
Developed explanation: The price of imported stock is cheaper (1) and this means TT can
sell their tools and equipment at a cheaper price (1). TT will be
more competitive than other shops and this will increase both
sales and profit (1).
(b) Ted and Mustafa want to increase the sales revenue from TT shops. There are three
options listed below. Consider the advantages and disadvantages of each of these
options and recommend which option you think Ted and Mustafa should choose.
Justify your answer. [12]
Content:
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to a maximum of 8 marks.
E.g. Renting drills is cheaper for the customers which means rentals could
increase. Because there are more rentals it will lead to higher revenue from
each drill and so sales revenue will increase leading to higher profits. 5 marks
for level 2 answer plus 1 application mark for mentioning drills.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
3 (a) Ted and Mustafa want to open another shop. Identify and explain four factors they
should consider when choosing a location for the new shop. [8]
Content:
competition; rent; size; complementary business; labour/workers; power supply; security;
customer parking; customer access; delivery access; government/planning restrictions; tax
incentive/subsidy; environmental/external costs
The marks available for this question are as follows: 4 marks for knowledge and 4 marks for
explanation/analysis. 1 mark for each factor identified (4 marks max). Up to one further mark
is available for explaining how the factor affects the location decision.
1 knowledge mark + 1 explanation mark (2 marks × 4 factors)
E.g. The rent for the property available (1) as a high rent might mean costs might be too high
as these would have to be passed on in the form of higher prices. (1)
(i) Calculate the values for w, x, y and z and write your answers below. [4]
Content:
w = $1 100 000 – 1 mark
x = $–(100 000) – 1 mark
y = $1 050 000 – 1 mark
z = $750 000 – 1 mark deduct 1 mark max if 000s are omitted.
E.g. if two right answers with 000s missing then 1 mark max.
(ii) Comment on two ways the cash flow position could be improved. Recommend
the best way for Ted and Mustafa to improve the cash flow over the next six
months. Justify your answer. [8]
Content:
Increase the cash inflows (1) – e.g. increase cash sales (1)
Reduce the cash outflows (1) – e.g. reduce overheads; obtain trade credit (1)
The answer should not refer to profit or loss – the focus is purely cash flow.
Solutions should be realistic for a sixth month period i.e. not long term solutions.
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to a maximum of 8 marks.
E.g. The amount of cash flow at the end of each month is decreasing as the
outflows are greater than the inflows in September through to December and
so the business needs to find ways to increase the cash sales in these months
to increase the inflows (L2). However, if it increases advertising to try to
encourage more sales then it may increase the outflows from advertising
expenditure as well as stock purchases and so inflows will need to be greater
than outflows for the cash flow to improve (L2).
6 marks for good level 2 answer.
Knowledge/Analysis/Evaluation
4 (a) Governments can pass laws to protect employees. Identify and explain two ways
employment laws might benefit employees in TT’s shops. [8]
Content:
minimum wage; health & safety; unfair dismissal; discrimination; working conditions;
hours/breaks; holidays;
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each way identified (2 marks max). Up to two further marks are available for
explaining each way. 2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
Possible application marks: tools; equipment; retail establishment; 10 hours and 6 days’
work; tool hire; 10 shops; Country A.
There may be other examples in context which have not been included here.
Developed explanation: The government protects employees against unfair dismissal (1)
so sales staff should not be dismissed without good reason (1) or
they can take TT to court to get compensation or reinstatement (1).
(b) The job of shop manager for a new shop will be advertised either in the national
newspaper, on posters in TT shops or on TT’s website. Consider the advantages and
disadvantages of each of these options to advertise the job. Recommend which
option you think will be the best. Justify your answer. [12]
Content:
National newspaper – Adv – seen by a large number of people across the country
Disad – expensive
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to a maximum of 8 marks.
E.g. National newspapers will be seen by many people across the country.
Potential applicants will see the advert and so a greater number of suitable
people who know how to manage a retail establishment will apply for the job of
shop manager and hence they are more likely to recruit a suitable manager.
5 marks for level 2 answer plus 1 application mark for mentioning retail
establishment.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
5 (a) Refer to Appendix 3. Identify and explain two possible effects on TT’s business of the
recent bad weather. [8]
Content:
increased demand for construction work; more sales; more profits; imports delayed; more
businesses set up in competition; damage to TT shops.
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each effect identified (2 marks max). Up to two further marks are available for
explaining each effect. 2 application marks are also available.
Below is an example to illustrate the difference between a simple explanation worth one
additional mark and a developed explanation worth 2 additional marks. An example is also
provided of where the application mark might be awarded.
There may be other examples in context which have not been included here.
Simple explanation: There is an increased demand for the construction of new houses.
(1 mark for knowledge)
Developed explanation: There is an increased demand for the construction of new houses
(1) and this will lead to an increased demand for tools and
equipment by the construction businesses (1). If TT is competitive
then sales revenue should increase and so should their profits (1).
(b) Mustafa wants to leave the partnership next year. Ted is considering three options
listed below. Consider the advantages and disadvantages of each of these options.
Recommend which option you think Ted should choose. Justify your answer. [12]
Content:
Partnership
Adv – additional capital; additional skills; shared workload
Disad – still unlimited liability; liable for partner’s actions; no continuity
Sole trader
Adv – own boss; keep all profits
Disad – limited capital; makes all the decisions; may not have all the necessary
skills
Limited company
Adv – limited liability; increased capital
Disad – legal requirements; less privacy with accounts; only sell shares to family
and friends
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to a maximum of 8 marks.
E.g. If Ted stays as a partnership then he will have additional capital from the
new partner. The new partner can also help to run the shops and may have
previous retail experience. They can therefore help to improve the business
and means that Ted isn’t on his own. 5 marks for level 2 answer plus 1
application mark for mentioning retail experience.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (CW/SW) 79706/2
© UCLES 2014 [Turn over
2
1 Anouk is a sole trader. She designs and makes jewellery at home, using hired (rented) equipment.
Anouk enjoys selling the jewellery at local markets. Last year her sales revenue increased by $500
to $3000. She plans to use $50 for a marketing budget. Anouk would like to do some primary
market research when she has time. Anouk thinks she should have a business partner.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two methods of primary market research that Anouk could use.
Method 1: ..................................................................................................................................
Method 2: ..............................................................................................................................[2]
(c) Identify and explain two possible advantages for Anouk of hiring equipment.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two disadvantages to Anouk of having a business partner.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Anouk could use either leaflets or local newspaper advertising as methods of promoting her
jewellery. Recommend which method you think Anouk should use. Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...............................................................................................................................................[6]
2 Keypeople is a recruitment agency which only operates in one small town in country Z. Its owner,
Rachel, and her two employees know that good customer service is important. Rachel would like to
expand her business. Keypeople offers a variety of human resource services to other businesses,
such as recruiting employees and preparing employment contracts. Rachel has been asked by a
local manufacturing business to recruit a senior manager.
(a) Identify two examples of tertiary sector business activity in your country, other than a
recruitment agency.
Example 1: ................................................................................................................................
Example 2: ............................................................................................................................[2]
(b) Identify two reasons why good customer service is important for Keypeople.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two reasons why employment contracts are used by businesses.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two stages in the recruitment process of the manager’s job for the
manufacturing business.
Stage 1: ....................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Stage 2: ....................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think Rachel should expand Keypeople? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]
3 HPT makes frozen food products. The Finance Director wants to improve HPT’s cash flow position.
Table 1 is an incomplete cash flow forecast for the next 3 months. The Finance Director thinks HPT
should not use expensive packaging. He is also worried that new Government health & safety laws
will not benefit the company and will only add to its costs.
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two benefits to HPT of having a cash flow forecast. You should refer to
Table 1 in your answer.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/M/J/14
7
(d) Identity and explain two reasons why packaging might be important for HPT.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) The Finance Director is worried that new Government health & safety laws will not benefit the
company and will only add to its costs. Do you agree? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
4 The economy of country U is in recession. The Government has cut interest rates to attract
businesses to set up in country U. JWR is a large multinational energy company. JWR may decide
to open a power station in country U. The Government thinks that opening a new power station will
create many external benefits. Some pressure groups do not want companies like JWR operating
in their country.
Feature 1: ..................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two effects of a cut in interest rates on businesses like JWR.
Effect 1: .....................................................................................................................................
...................................................................................................................................................
Effect 2: .....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two actions that pressure groups could use to influence JWR’s decision.
Action 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Action 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two external benefits as a result of opening a new power station in
country U.
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that the Government of country U should try to attract multinational businesses?
Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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...............................................................................................................................................[6]
5 Callow is a large retail business based in country X. ‘Our employees are an important stakeholder’,
said the Managing Director. ‘To make sure we stay profitable we need to motivate them.’ Callow
trains all of its shop employees by using off the job training.
Managing Director
Shop Managers × 6
Department Managers × 4
Supervisors × 2
Sales Assistants × 8
(b) Identify two functions of management that each shop manager will have to perform.
Function 1: ................................................................................................................................
Function 2: ............................................................................................................................[2]
Feature 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Feature 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/M/J/14
11
(d) Identify and explain two possible methods that Callow could use to improve the motivation of
its employees.
Method 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think it is a good idea for Callow to use off the job training for all its shop employees?
Justify your answer.
...................................................................................................................................................
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...................................................................................................................................................
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...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[6]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2014 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 11
Some knowledge: [1] e.g. a financial plan or sum of money put aside for marketing
(b) Identify two methods of primary market research that Anouk could use. [2]
Application [2 × 1] 1 mark per method
Methods could include: Questionnaires/survey, interviews, observations, focus group
Do not accept marketing agency or field research as these are not appropriate for a small
business.
(c) Identify and explain two possible advantages for Anouk of hiring equipment. [4]
Knowledge [2 × 1] – award 1 mark for each relevant advantage
Application [2 × 1] – award 1 mark for each relevant different explanation
Note: Do not accept cheaper or saves costs as these are too vague.
(d) Identify and explain two disadvantages to Anouk to having a business partner. [6]
Knowledge [2 × 1] – award 1 mark for each disadvantage identified
Application [2 × 1] – award 1 mark if relevant reference made to Anouk
Analysis [2 × 1] – award 1 mark for each relevant explanation
2
Page 3 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 11
(e) Anouk could use either leaflets or local newspaper advertising as methods of
promoting her jewellery. Recommend which method you think Anouk should use.
Justify your answer. [6]
Knowledge [2] – award up to 2 marks for identification of relevant points (e.g. advantages or
disadvantages of either method)
Application [1] – award 1 mark if relevant reference made to Anouk’s business
Analysis [1] – award 1 mark for relevant development of point(s)
Evaluation [2] – justified decision made as to which of the two methods would be most
appropriate for Anouk to use.
Points include:
Advertising in local papers:
• Low cost [k] so she will be able to afford this [an] in her $50 budget [app]
• Would widen her target audience [k] as many people read newspapers [an]
• Not everyone reads newspapers [k] so her target audience might not be aware of her
business [an]
• Repeat adverts can be expensive [k]. Using up the marketing budget [app].
Leaflets:
• Easy to distribute to lots of people [k] could widen her possible audience [an] to help
increase her sales revenue above $3000 [app]
• Can be kept for reference [k] for when people want to buy rings or bracelets as presents
[app]
• Can be colourful [k] which will attract people’s attention [an]
• People might see them as junk [k] so throw them away [an].
Note: For 6 marks there must be a justified decision as to why it is the best option.
2 (a) Identify two examples of tertiary sector business activity in your country, other than a
recruitment agency. [2]
Knowledge [2 × 1] 1 mark per example
Examples might include: Hairdressers, transport or distribution company; banking, retailers,
doctors. Accept any reasonable answer but only one example of a retailer.
(b) Identify two reasons why good customer service is important for Keypeople. [2]
Application [2 × 1] - award 1 mark per reason
Reasons might include: customer feels valued / good public relations / creates higher level of
customer satisfaction / leads to repeat business (brand loyalty) / can lead to word of mouth
recommendations/ motivation of workers/brand image.
(c) Identify and explain two reasons why employment contracts are used by businesses.
[4]
Knowledge [2 × 1] – award 1 mark for each relevant reason
Analysis [2 × 1] – award 1 mark for each relevant explanation
3
Page 4 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 11
Note: Details of content within a contract can be awarded only once as knowledge (e.g.
wages/hours/holidays).
(d) Identify and explain two stages in the recruitment process of the manager’s job for the
manufacturing business. [6]
Knowledge [2 × 1] – award 1 mark for each stage identified
Application [2 × 1] – award 1 mark if relevant reference made to Key people
Analysis [2 × 1] – award 1 mark for each relevant explanation
(e) Do you think Rachel should expand Keypeople? Justify your answer. [6]
Knowledge [2] – award up to 2 marks for identification of relevant points
Application [1] – award 1 mark if relevant reference made to key people
Analysis [1] – award 1 mark for relevant development of point(s)
Evaluation [2] – justified decision made as to whether Rachel should expand key people
3 (a) Identify two fixed costs that HPT might have. [2]
Application [2 × 1] 1 mark per fixed cost
Fixed costs could include: rent, rates, interest payments, electricity, gas, water, salaries.
Allow practical examples such as freezers.
4
Page 5 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 11
Note: Do not accept wages and packaging as fixed costs are identified in the data.
Note: Answers should be in millions but accept 180 000 and (10 000) due to question layout.
(c) Identify and explain two benefits to HPT of having a cash flow forecast. You should
refer to Table 1 in your answer. [4]
Knowledge [2 × 1] – award 1 mark for each relevant benefit identified
Application [2 × 1] – award 1 mark for each relevant explanation in context
Note: Do not reward a definition of cash flow forecast as the question asks for the benefits
(d) Identity and explain two reasons why packaging might be important for HPT. [6]
Knowledge [2 × 1] – award 1 mark for each relevant reason
Application [2 × 1] – award 1 mark for each relevant reference to HPT
Analysis [2 × 1] – award 1 mark for each relevant explanation
For each reason maximum 3 marks [1k + 1app + 1an].
(e) The Finance Director is worried that new Government health & safety laws will not
benefit the company and will only add to its costs. Do you agree? Justify your answer.
[6]
Knowledge [2] – award up to 2 marks for identification of relevant issue(s)
Application [1] – award 1 mark if relevant reference made to aspects of HPT’s business
Analysis [1] – award 1 mark for relevant development of point(s)
Evaluation [2] – justified decision made as to whether the costs of meeting the H&S laws will
be greater than the benefits for HPT. Either viewpoint is acceptable.
5
Page 6 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 11
(b) Identify two effects of a cut in interest rates on businesses like JWR. [2]
Application [2 × 1] – award 1 mark per effect
Points could include: Lower cost of borrowing money, existing loans could become cheaper,
encourage businesses to expand, increased demand.
(c) Identify and explain two actions that pressure groups could use to influence JWR’s
decision. [4]
Knowledge [2 × 1] – award 1 mark for each relevant action
Application [2 × 1] – award 1 mark for each relevant explanation of how it would affect the
decision to set up a new power station
Actions include:
• Lobbying government [k] to try to stop JWR from locating the power station in certain
locations [app]
• Organise a boycott [k] so customers do not buy electricity from JWR [app]
• Write letters to newspapers [k]
• Hold public meetings [k]
• Arrange a meeting with JWR [k]
• Protest / demonstration [k]
• Petitions [k]
• Direct action [k].
(d) Identify and explain two external benefits as a result of opening a new power station in
country U. [6]
Knowledge [2 × 1] – award 1 mark for each relevant benefit identified
Application [2 × 1] – award 1 mark if relevant context
Analysis [2 × 1] – award 1 mark for each relevant explanation
For each reason maximum 3 marks [1k + 1app + 1an].
6
Page 7 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 11
• Provide essential resources for community [k] as people will have access to energy [app]
so improving their standard of living [an]
• Improved road infrastructure [k] as JWR will need to ensure there is good access to the
power station [app] which could help reduce congestion for local people [an]
• Tax revenue [k].
(e) Do you think that the government of country U should try to attract multinational
businesses? Justify your answer. [6]
Knowledge [2] – award up to 2 marks for identification of relevant issue(s).
Analysis [2] – award 1 mark for relevant development of point(s)
Evaluation [2] – justified decision made as to whether the government of country U should try
to attract businesses like JWR. Either viewpoint is acceptable.
(b) Identify two functions of management that each shop manager will have to perform. [2]
Application [2 × 1] award one mark per function
Functions could include: planning rotas, organise or delegate tasks to various employees,
coordinating sections, giving commands to department managers, controlling shop budgets
or monitoring targets.
Note: Do not accept functions of management which can only be applied to production.
Leadership is too vague.
(c) Identify and explain two features of Callow’s organisational structure. [4]
Knowledge [2 × 1] – award 1 mark for each relevant feature
Application [2 × 1] – award 1 mark for each relevant explanation
7
Page 8 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 11
Note: Do not award wide/narrow span of control alone as this does not apply to the whole
chart, an employee must be specified.
(d) Identify and explain two possible methods that Callow could use to improve the
motivation of its employees. [6]
Knowledge [2 × 1] – award 1 mark for each relevant method identified
Application [2 × 1] – award 1 mark if relevant reference made to Callow’s business
Analysis [2 × 1] – award 1 mark for each relevant explanation
For each reason maximum 3 marks [1k + 1app + 1an].
(e) Do you think it is a good idea for Callow to use off the job training for all its shop
employees? Justify your answer. [6]
Knowledge [2] – award up to 2 marks for identification of relevant issue(s)
Application [1] – award 1 mark if relevant reference made to Callow’s business
Analysis [1] – award 1 marks for relevant development of point(s)
Evaluation [2] – justified decision made as to whether it is a good idea for Callow to use off
the job training for all its shop employees. Either viewpoint is acceptable.
Note: Do not accept development or evaluation which focuses on whether training is a good
idea for workers.
8
CAMBRIDGE INTERNATIONAL EXAMINATIONS
International General Certificate of Secondary Education
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2014 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.
Page 2 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0450 21
• Marking should be positive: marks should not be subtracted for errors or inaccuracies.
• When examiners are in doubt regarding the application of the mark scheme to a candidate’s
response, the team leader must be consulted.
• Crossed out work should be marked UNLESS the candidate has replaced it with an alternative
response.
• Errors that are carried forward (e.g. when an incorrect numerical answer to one part of a question
is used as the starting point for a calculation in the next part of the question) should not be
compounded - use the ‘own figure rule’.
• Poor spelling, handwriting or grammar should not be penalised as long as the answer makes
sense.
• Answers that are not written on the answer lines should be marked.
• Scoris annotations to be used for part (b) questions are – ‘L1’, ‘L2’ and ‘L3’ should be used to
indicate the level being awarded to a response. ‘App' should be used to indicate where the
application marks are being awarded. Annotations for part (a) questions should be green ticks to
indicate where credit is being given and ‘App’ to indicate application marks.
• A blank space, dash, question mark and a response that bears no relation to the question
constitutes a ‘no response’.
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer and the senior examiners should be consulted if further guidance is
required.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) Identify and explain two advantages and two disadvantages to Fabian of working for
himself rather than being an employee of another business. [8]
Content:
Advantages:
• Make own decisions
• Choose own work hours
• Keep any profits made
• Taking more responsibility
• More power
• Less worried about being unemployed
• High level of motivation
Disadvantages:
• Not a regular wage
• May not be able to take holidays
• No one to help him
• Limited capital
• More worry about business failure
• More risk of losing personal possessions
• No experience of management/flower business
• More administration to carry out
The marks available for this question are as follows: 4 marks for knowledge; 4 marks for
application.
1 mark for each advantage/disadvantage identified plus 1 explanation mark for each
advantage/disadvantage. (2 marks × 2 advantages + 2 marks × 2 disadvantages)
(b) Refer to Appendix 1. Consider the advantages and disadvantages of each person who
wants to form a partnership with Fabian. Recommend which one Fabian should
choose. Justify your choice. [12]
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. Miranda has experience of working in a shop and so she would know how to
serve customers in the flower shop. She could also have experience of how to run
a shop but she would not know how to do the accounts or ordering of flowers and
so she could not help Fabian with this.
5 marks for level 2 answer plus one application mark for mentioning ordering of
flowers.
Level 3 – Detailed discussion of at least two level 2 answers and then a conclusion at the
end which justifies who is the best person to choose compared to the other people.
Possible application marks: anything from Appendix 1; flowers; flower shop; part-time
employees; hotels and restaurants; flower arrangements; new business.
There may be other examples in context which have not been included here.
2 (a) Identify and explain two possible business objectives Fabian and his new partner
could set for their business. [8]
Content:
• Survival/break-even
• To make a profit
• Growth/expansion
• Customer satisfaction/quality of service
• Creating a good brand image/reputation
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each objective identified (2 marks maximum). Up to two further marks are
available for explaining how the objective will be relevant to the new business.
2 application marks are also available.
Possible application marks: flowers; flower shop; partnership; hotels and restaurants; flower
arrangements; weddings/Valentine’s Day/birthdays; imported supplies of flowers.
There may be other examples in context which have not been included here.
Developed explanation: Survival (1) as the business is new and small the partners may not
have much experience in the flower market (2). So they want the
business to start to get customers and get established in the first
year as many businesses fail in their first year (3).
(b) Consider the advantages and disadvantages of Option A and Option B. Recommend
which is the best option for Fabian to choose. Justify your answer using profitability
ratios. [12]
Content: Option A – demand all year round; regular orders each week; regular work for
employees; reduced price for bulk orders; business customers pay after payment
for stock of flowers – possible cash flow problems;
gross profit = $160,000(L1);
net profit = $40,000 (L2);
NPM = 20% (L2);
GPM = 80% (L2)
Option B – large potential sales for special occasions; higher prices; cash paid so
no delay in payment; low sales at certain times of the year; varying demand for
labour;
gross profit = $90,000(L1);
net profit = $30,000 (L2);
NPM = 25% (L2);
GPM = 75% (L2)
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. Option A – Payments for the flower arrangements are made after payment for
stock of flowers have been ordered and paid for. Therefore it is possible this will
cause cash flow problems for Fabian leading to increased costs from interest
payments on an overdraft. 5 marks for level 2 answer.
Level 3 – Detailed discussion of at least two level 2 answers and then a recommendation at
the end which justifies which is the best option to choose compared to the other
option.
Knowledge/Analysis/ Evaluation
3 (a) Refer to Appendix 2. Identify and explain four factors Fabian should consider when
deciding which sources of finance to use for his new business. [8]
Content:
• amount needed (amount of savings available or redundancy payment)
• how long it takes to pay it back
• how quickly the finance is needed
• whether it needs to be paid back (family investment/grant)
• interest rate
• type of business organisation
• credit rating
• terms and conditions of source of finance
The marks available for this question are as follows: 4 marks for knowledge; 4 marks for
application.
1 mark for each factor identified plus 1 explanation mark for each factor.
(b) Explain to Fabian why each of the following documents will be important to managing
his new business. Choose which is likely to be the most useful. Justify your choice.
[12]
Content: Profit/Loss account – show if the business is covering its costs – if not then the
business will not be making a return on their investment.
Cash flow forecast – shows how they are managing the cash inflows and outflows
of the business – this will help Fabian to manage working
capital so the business doesn’t become insolvent. Prediction.
N.B. do not accept profit.
Break–even chart – allows Fabian to know how many sales he needs in order to
cover all his costs – this allows him to monitor sales to make
sure he is not going to make a loss – if sales are too low
then he can do something to increase them. Prediction/target.
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. Break–even chart allows Fabian to know how many sales he needs in order to
cover all his costs. This allows him to monitor sales to make sure he is not going to
make a loss (L2). If sales are too low then he can do something to increase them
such as have a promotion of ‘buy one flower arrangement and get a second one at
a discount’. This will increase income as long as the discount is not more than the
cost of buying the flowers. (L2)
6 marks for level 2 answer plus one application mark for mentioning flower
arrangements.
Level 3 – Detailed discussion of at least two level 2 answers and then a conclusion at the
end which justifies which is the most useful compared to the other documents.
Possible application marks: flowers; flower shop; partnership; hotels and restaurants; flower
arrangements; trade credit; weddings/Valentine’s Day/birthdays; imported supplies of flowers;
There may be other examples in context which have not been included here.
4 (a) Fabian will use job production when completing each order for flowers. Identify and
explain two benefits of using job production for Fabian Flowers. [8]
Content:
• Meets individual needs of customers
• Unique product
• High quality
• Can charge a higher price
• Job satisfaction
• Fewer unsold products
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application and 4 marks for explanation/analysis.
1 mark for each benefit identified (2 marks maximum). Up to two further marks are available
for explaining how the benefit is applicable to Fabian. 2 application marks are also available.
Possible application marks: flower shop; partnership; part-time employees; hotels and
restaurants; flower arrangements; weddings/Valentine’s Day/birthdays; imported supplies of
flowers.
There may be other examples in context which have not been included here.
Developed Explanation: Can meet the individual needs of consumers (1) as the flower
arrangement can be to the exact design of the customer (2). This
makes each product unique to that customer and so they will be
happier with the order and may tell their friends to go to the shop
(3).
(b) Assume Fabian chooses Option B (retail customers). He must decide on a pricing
strategy to use. Consider the advantages and disadvantages of the following three
pricing strategies. Recommend which one he should choose. Justify your answer.
[12]
Cost-plus pricing • average cost calculated and then a percentage is added on for
profit
• easy to apply this method
• competitors’ price may be lower
Competitive pricing • set pricing around the same price as competitors’ prices
• sales possibly higher
• research costs to check on competitors’ prices
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. Cost-plus pricing is where the cost of buying the flowers is calculated and then
a percentage of the cost is added for profit to determine the price to charge
customers. This is a simple way to work out the price of a flower arrangement but it
may not result in higher profits being earned if he does not look at competitors’
prices. (L2)
5 marks for level 2 answer plus 1 application mark for making reference to flowers
and flower arrangements.
Possible application marks: flowers; flower shop; hotels and restaurants; flower
arrangements; weddings/Valentine’s Day/birthdays; imported supplies of flowers; quality of
supplies; new business.
There may be other examples in context which have not been included here.
5 (a) Identify and explain one advantage and one disadvantage to Fabian Flowers of having
a website for the shop. [8]
The marks available for this question are as follows: 2 marks for knowledge; 2 marks for
application and 4 marks for explanation/analysis.
Possible application marks: flowers; flower shop; partnership; hotels and restaurants; flower
arrangements; weddings/Valentine’s Day/birthdays.
There may be other examples in context which have not been included here.
Developed Explanation: Higher distribution costs are a disadvantage (1) because each
flower arrangement will need to be delivered to the customer
instead of the customer collecting the flower arrangement from the
flower shop (2). This will increase the costs for Fabian and his
partner which may reduce the profits for the business unless he
can pass these costs on to the customer (3).
(b) Fabian needs to decide where to buy supplies of flowers for the shop. Consider the
advantages and disadvantages each of the three alternative sources of supply
outlined in Appendix 3. Recommend which supplier Fabian should choose to buy his
flowers from. Justify your answer. [12]
Content: Import flowers from country X – laws on ethical production; no child labour; high
quality; high costs; limited range of flowers.
Purchase flowers from a flower wholesaler - uses unsustainable methods; low cost
flowers; low quality; wide range of flowers.
Buy from local flower growers – transport costs low; low cost flowers when bought
in bulk; wide range of flowers not available all year round; mixed quality.
Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional
level 2 answer up to maximum of 8 marks.
E.g. In country X there are no children employed to pick flowers. Although costs
may be higher it does mean that children will not be working producing flowers.
This may be something Fabian feels strongly about and he can use it in his
advertising which may attract customers who feel the same as him.
5 marks for level 2 answer plus one application mark for mentioning picking the
flowers.
Level 3 – Detailed discussion of at least two level 2 answers and then a recommendation at
the end which justifies which is the best supplier to choose compared to the other
suppliers.
Possible application marks: anything from Appendix 3; new business; flower shop; hotels and
restaurants; flower arrangements; trade credit; weddings/Valentine’s Day/birthdays.
There may be other examples in context which have not been included here.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC HB (EL/CGW) 79716/1
© UCLES 2014 [Turn over
2
1 Lu is a sole trader. He manages a bakery shop making and selling bread and cakes. He employs
4 workers all of whom are paid on time rate. Lu wants to expand the business by buying a new
shop and using it as a café (restaurant). He also wants to make a wider range of cakes, such as
wedding and birthday cakes, for which he thinks there is a demand. At present the business sells
all of the bread and cakes it makes.
...................................................................................................................................................
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...............................................................................................................................................[2]
(b) Identify two methods Lu could use for paying employees (other than time rate).
Method 1: ..................................................................................................................................
Method 2: ..............................................................................................................................[2]
(c) Identify and explain two suitable sources of finance Lu could use to buy a new shop.
Source 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
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Source 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
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...............................................................................................................................................[4]
(d) Identify and explain two methods of promotion that Lu could use for the new range of cakes.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
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Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
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...............................................................................................................................................[6]
(e) Do you think that Lu’s business will be more profitable if he expands it by opening a café in a
new shop? Justify your answer.
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2 Rakesh manages a car repair business in country Y. He buys cars that are damaged or have parts
missing. Rakesh adds value by repairing these cars until they look like new ones. He employs
5 workers to do the repairs. The business holds a large stock of car parts and Rakesh always pays
cash for these. However Rakesh’s sales are usually on credit.
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(d) Identify and explain two reasons why the weekly net profit may not be the same as the weekly
net cash flow for Rakesh’s business.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
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Explanation: ..............................................................................................................................
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...............................................................................................................................................[6]
(e) Country Y’s economy is in a recession. Do you think that this will make Rakesh’s business
less successful? Justify your answer.
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3 Natural Care is a company that makes soap. The business always acts in an ethical way. It follows
fair trade principles by paying fair prices to its suppliers. It uses a cost plus pricing method when
selling its products. Table 2 gives data about the company’s sales of soap and its share of the
national market for soap.
Table 2
Natural Care Market share of
Year sales ($m) Natural Care (%)
2012 40 10
2014 44 7
The Marketing Director of Natural Care wants to introduce a new competitive pricing strategy to
help regain market share. She also wants the Board of Directors to think about changing its ethical
policy.
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why Natural Care’s market share fell in 2014.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two advantages to Natural Care of acting in an ethical way by paying fair
prices to its suppliers.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two ways in which Natural Care might be affected by changing to a
competitive pricing strategy.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Way 2: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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...............................................................................................................................................[6]
(e) Do you think that customers of products such as soap always benefit from an increase in
competition? Justify your answer.
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4 Genel manufactures clothes. The company uses an autocratic style of management. It employs a
large number of workers and pays low wages. Many employees leave the company each year but
they are easily replaced. Working conditions in the factories are poor. Health and safety is ignored
and long hours are worked. Employee motivation is low and employee productivity is falling.
...................................................................................................................................................
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...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two possible reasons why Genel ignores health and safety in its factory.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two ways in which Genel would benefit from a more motivated workforce.
Way 1: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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Way 2: .......................................................................................................................................
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Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two ways that Genel could use to improve employee productivity in its
factories.
Way 1: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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Way 2: .......................................................................................................................................
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Explanation: ..............................................................................................................................
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...............................................................................................................................................[6]
(e) Do you think Governments should introduce laws to protect employees’ interests in businesses
such as Genel? Justify your answer.
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Figure 1
Board of Directors
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(i) Identify the span of control of the Managing Director of the Asia division.
.......................................................................................................................................[1]
.......................................................................................................................................[1]
(c) Identify and explain two possible reasons why Zalpha has poor internal communications.
Reason 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]
© UCLES 2014 0450/11/O/N/14
11
(d) Identify and explain two advantages to Zalpha of using centralised decision making.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Advantage 2: .............................................................................................................................
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Explanation: ..............................................................................................................................
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...............................................................................................................................................[6]
(e) Do you think that multinational companies such as Zalpha benefit the countries in which they
operate? Justify your answer.
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BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2014 series for
most Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.
Clear understanding [2] e.g. a business owned and controlled by one person OR ownership
lies in the hand of an individual.
Some understanding [1] e.g. a business where one person works/runs on their own.
Some understanding plus a relevant feature can gain [2] e.g. keeps all profits / unlimited
liability.
(b) Identify two methods Lu could use for paying employees (other than time rate). [2]
(c) Identify and explain two suitable sources of finance Lu could use to buy a new
shop. [4]
(d) Identify and explain two methods of promotion that Lu could use for the new range of
cakes. [6]
Note – Reference to cakes alone is not sufficient for application as this is in the question
stem.
Specific examples of promotion are required so do not accept above and below the line
promotion or forms of media alone e.g. newspapers, as these are not specific methods.
Two distinct examples of application required for the 2 app marks.
(e) Do you think that Lu’s business will be more profitable if he expands it by opening a
café in a new shop? Justify your answer. [6]
Developed example:
Sales revenue of the business should increase [k] but expansion creates extra costs [k] such
as the additional rent [app] so profits may not increase [an]. Everything depends upon the
success of the venture in generating new customers [eval].
Clear understanding [2] e.g. costs that do not change [1] as the level of activity changes [+1]
Some understanding [1]: e.g. costs that stay the same.
Note – Must link answer to level of activity/output to gain full marks. Do not accept examples.
Clear understanding [2] e.g. the difference between the price of the product and the cost of
the resources needed to produce it OR an improvement to the product [1] that makes it worth
more [1].
Some understanding [1]: e.g. makes product more valuable.
Note – increased value is a repetition of the question and should not be credited.
Correct answer [4]: 6000 ($ not required. No further calculations are required)
Some understanding [can gain up to 3 marks]:
Breakdown of marks as follows:
Revenue per week (5000 × 6) =$30 000 [1]
Costs per week:
[2000 × 6] + [500 × 6] + [1000 × 5] + $4000 = $24 000 [2] 1 mark for 3 of these 4 correct costs
NOTE – OFR (own figure rule) can apply e.g. (i) 30 000 [1] – 7500 = 22 500 [+1]
(d) Identify and explain two reasons why the weekly net profit may not be the same as the
weekly net cash flow for Rakesh’s business. [6]
Explanation will focus on the fact that timing of flows creates an imbalance between cash in
and out.
(e) Country Y’s economy is in a recession. Do you think that this will make Rakesh’s
business less successful? Justify your answer. [6]
Developed answer:
Recessions usually mean a fall in disposable income [k] and an increase in
unemployment [k]. Both of these usually mean a fall in consumer demand [an] especially for
non-essential products such as cars [app]. This is not good news for Rakesh’s business
[eval]. However, it is possible that there will be a switch in demand towards cheaper cars [an]
and this might help his sales so he could still be successful [eval].
(b) Identify two possible reasons why Natural Care’s market share fell in 2014. [2]
(c) Identify and explain two advantages to Natural Care of acting in an ethical way by
paying fair prices to its suppliers. [4]
Note – do not reward discounts as the question is asking about fair pricing
(d) Identify and explain two ways in which Natural Care might be affected by changing to
a competitive pricing strategy. [6]
(e) Do you think that customers of products such as soap always benefit from an
increase in competition? Justify your answer. [6]
Points to include:
• Competition increase choice [k] therefore they may gain a product that better suits their
needs [an]
• Leads to lower prices [k] which means more consumers can afford to buy [an]
• Products become more consumer orientated [k] for examples they can buy soap for
sensitive skin [app]
• Lead to hidden quality cuts [k] as manufacturer looks to cut costs [an] to remain price
competitive [app]
Developed answer:
Competition generally lowers prices [k] as firms try to remain price competitive [app]
customers they may gain a product that better suits their needs [an] customers may not
benefit if firms reduce quality. [k] The extent to which they benefit depends on how firms
compete [ev] and what customers value in the product [ev].
Clear understanding [2] e.g. an autocratic style implies that all decisions are made by the
management [1] without consultation and discussion [+1] OR workers have no say in
decision making [2].
Some understanding [1] e.g. a manager who tells others what todo.
(b) Identify two possible reasons why Genel ignores health and safety in its factory. [2]
(c) Identify and explain two ways in which Genel would benefit from a more motivated
work force. [4]
(d) Identify and explain two ways that Genel could use to improve employee productivity
in its factories. [6]
(e) Do you think Governments should introduce laws to protect employees’ interests in
businesses such as Genel? Justify your answer. [6]
Points to include:
• Laws are needed to ensure safety [k] which the company does not follow employee
protection [app] so there is no guarantee that Genel would abide by the laws [eval]
• Discourage businesses from setting up in a country [k] because it would increase
costs [an]
• Higher business costs [k] could see workers lose their jobs [an]
• Could help retain workers leading to lower recruitment costs?
Note – the candidate may address the question from the viewpoint of either the employee,
business or the Government.
Developed answer:
Laws are needed to ensure safety [k] and a fair wage for workers[k] which this company
does not follow[app] because it increases their costs[an] therefore introducing laws may have
no effect [ev] unless they are monitored [ev].
Clear Understanding [2] – a business with factories, production or service operations in more
than one country OR a business with production or service in another country outside its
normal area of operation.
Some Understanding [1] – e.g. has businesses everywhere / works in more than one
country / operates in more than one country.
(b) (i) Identify the span of control of the Managing Director of the Asia division. [1]
(ii) How many levels are there in the chain of command? [1]
(c) Identify and explain two possible reasons why Zalpha has poor internal
communications. [4]
(e) Do you think that multinational companies such as Zalpha benefit the countries in
which they operate? Justify your answer. [6]
• Profits are often repatriated [k] limiting the countries growth [an]
• Resources are depleted [k] so there is less available for other businesses [an]
manufacturing in the country needs raw materials [app]
• Local businesses close [k] due to increased competition [app]
• Exploitation can occur [k].
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (SLM/CGW) 79754/2
© UCLES 2014 [Turn over
2
PB Bank
PB Bank is a public limited company. The bank has been trading successfully for 20 years. The Board
of Directors wants to see the number of customers increasing; however, over the last 2 years the
number of customers has remained the same. Should PB Bank try to expand by taking over another
bank or should it try to attract more customers from its competitors? DOTT Bank is a smaller bank than
PB Bank and could become a takeover target.
PB Bank is a large bank with 15 000 employees. The organisational structure is shown in Appendix 1.
The Human Resources (HR) Director is responsible for internal communication. Some employees have
complained that they often do not get told about important decisions. Some information is posted on
the company website but some of this information is difficult to find.
PB Bank already offers online (Internet) banking and the Marketing Director thinks that mobile (cell)
phone banking will become popular with customers. They used a questionnaire to find out the opinions
of their customers (see Appendix 3).
An increasing number of PB customers are now only using online banking. PB needs to close either
branch X or branch Y.
Branch X
Located in a small town; used mainly by customers of the bank to deposit and withdraw money; no
other banks nearby; the branch always has long queues of customers.
Branch Y
Located in the city centre; used mainly by tourists to change foreign currency; not many PB customers
live nearby; near to several other bank’s branches; the branch is busy only in the mornings.
Appendix 1
Board of Directors
Managing Director
Appendix 2
Appendix 3
Results from a questionnaire used on Monday 5 May 2014 in the main street of the
city centre in the afternoon
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (SLM) 79753/3
© UCLES 2014 [Turn over
2
1 (a) Identify and explain two disadvantages to PB Bank of being a public limited company.
Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Disadvantage 2: ........................................................................................................................
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Explanation: ..............................................................................................................................
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(b) Employees complain they never know important information about the bank. Consider
three ways the HR Director could use to improve the internal communication in the bank.
Recommend which will be the best way to use. Justify your answer.
Way 1: .......................................................................................................................................
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Way 2: .......................................................................................................................................
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Way 3: .......................................................................................................................................
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Recommendation: .....................................................................................................................
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.............................................................................................................................................[12]
2 (a) Banking is a tertiary sector business. Identify four other types of tertiary sector businesses
that PB Bank might use and explain what services they offer to PB Bank.
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) Refer to the organisational chart in Appendix 1. The directors are thinking of removing the
middle management level (deputy managers). Consider the advantages and disadvantages of
widening the span of control for the remaining managers. Recommend whether the directors
should remove this level of management. Justify your answer.
Advantages: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantages: .........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
3 (a) Identify and explain two appropriate ways in which the results from the question ‘do you have
a bank account? ’ in Appendix 3 could be presented.
Way 1:
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2:
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) PB needs to close some of its branches as more customers use online banking. Consider
the advantages and disadvantages of branch X and branch Y. Recommend which branch PB
should close. Justify your answer.
Branch X: ..................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Branch Y: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
4 (a) Identify and explain four reasons why the information in Appendix 3 may not be an accurate
record of the views of all bank customers.
Reason 1: .................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 3: .................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 4: .................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) The Marketing Director of PB Bank wants to promote mobile (cell) phone banking to its
existing customers. Consider the advantages and disadvantages of each of the following
three ways of promoting mobile phone banking. Recommend which option the Marketing
Director should choose. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
5 (a) Identify and explain two possible effects on DOTT Bank employees if DOTT Bank was taken
over by PB Bank.
Effect 1: .....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Effect 2: .....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) Consider the advantages and disadvantages to PB Bank of taking over DOTT Bank.
Recommend whether PB should take over DOTT Bank. Justify your answer by using
appropriate calculations based on the data in Appendix 2.
Advantages: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantages: .........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2014 series for
most Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.
This mark scheme includes a summary of appropriate content for answering each question. It
should be emphasised, however, that this material is for illustrative purposes and is not
intended to provide a definitive guide to acceptable answers. It is quite possible that among
the scripts there will be some candidate answers that are not covered directly by the content
of this mark scheme. In such cases, professional judgement should be exercised in assessing
the merits of the answer and the senior examiners should be consulted if further guidance is
required.
Examples of possible answers are also included in this mark scheme. Again, it should be
emphasised that this is for illustrative purposes and the examples chosen represent only
some of the many possible responses that would merit reward.
Application marks are not awarded for the name of the business or person from the case
material. Application is by answering in the context of the case or by using the information in
the case to help answer the question.
1 (a) Identify and explain two disadvantages to PB Bank of being a public limited company.
[8]
Content:
• Cannot control who buys the shares/Easier to be taken over
• Expect dividends to be paid
• Accounts published
• Legal formalities need to be followed
• Divorce between ownership and control
• More difficult for effective communication
• May experience diseconomies of scale/management problems.
The marks available for this question are as follows: 2 marks for knowledge; 4 marks for
analysis and 2 marks for application.
There may be other examples in context which have not been included here.
1 mark for each disadvantage identified plus 2 explanation marks for each disadvantage plus
1 application mark. (4 marks × 2 disadvantages)
Explanation: Accounts published (1) as this is a legal requirement and the accounts
need to be published each year. Anyone can see the accounts and so
this means competitors can look at the accounting details of the bank.
(2) A rival bank might want to take over the bank and finding out about
its accounts could help it decide to take it over. (3) (Plus 1 application
mark for answering in the context of banks).
(b) Employees complain they never know important information about the bank. Consider
three ways the HR Director could use to improve the internal communication in the
bank. Recommend which will be the best way to use. Justify your answer. [12]
Content:
• Email
• Telephone
• Text/SMS
• Meetings
• Memorandum
• Company newsletter
• Noticeboards/posters
• Letters
• Put information on the website
• Improve managers’ communication skills
Level 1 1 mark for each suitable way/statement e.g. the HR Director could use email
to inform employees about any new changes to the bank. (1 mark)
Level 2 5 marks for the first level 2 answer and then one extra mark for each
additional level 2 answer up to maximum of 8 marks.
e.g. The HR Director could use email to inform employees about any new
changes to the bank. Email is quick and cheap to use and can be sent out as
a global email which means it goes to everyone on the email contact list.
However, not all 15 000 employees may have a bank email address, so the
message may not get through to all employees and it will be difficult to know if
the message has been read.
5 marks for level 2 answer plus one application mark for including reference to
15 000 employees at the bank.
Possible application marks: public limited company; 15 000 employees; lack of good
communication; branches; area manager; branch manager; company website;
information difficult to find.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
2 (a) Banking is a tertiary sector business. Identify four other types of tertiary sector
businesses that PB Bank might use and explain what services they offer to PB Bank.[8]
Content:
• Insurance
• Telephone communication
• Internet provider
• Advertising agency
• Training provider
• Recruitment agency
• Security
• Communication
• Accountants.
The marks available for this question are as follows: 4 marks for knowledge and 4 marks for
explanation/analysis.
1 mark for each example of a tertiary sector service identified (4 marks max). One further
mark is available for explaining how the service will be helpful to the bank. (2)
Explanation: Insurance (1) provides businesses with protection against risks such as theft
or damage to branch premises.
(b) Refer to the organisation chart in Appendix 1. The directors are thinking of removing
the middle management level (deputy managers). Consider the advantages and
disadvantages of widening the span of control for the remaining managers.
Recommend whether the directors should remove this level of management.
Justify your answer. [12]
Content:
Advantages Disadvantages
Level 1 1 mark for each statement e.g. the removal of a layer of management is likely
to lead to increased delegation. (1 mark)
Level 2 5 marks for the first level 2 answer and then one extra mark for each
additional level 2 answer up to maximum of 8 marks. e.g. the removal of a
layer of management is likely to lead to increased delegation. This will mean
that employees will have a wider range of jobs to do and also be given more
responsibility to carry out tasks such as granting customer loans. This could
be very motivating for the employees as they will feel trusted. 5 marks for level
2 answer plus 1 application mark for including reference to customer loans in
the answer.
Level 3 Detailed discussion of at least two level 2 answers and then a conclusion at
the end which justifies whether or not delayering should be carried out.
Application Knowledge/Analysis/Evaluation
3 (a) Identify and explain two appropriate ways in which the results from the question ‘do
you have a bank account’ in Appendix 3 could be presented. [8]
Content:
Bar chart (1) Sketch of bar chart (1) – is easy to see total numbers (1) – easy to see which
are the highest/lowest totals (1).
Pie chart (1) Sketch of pie chart (1) – is easy to see the proportions (1) – easy to see which
is the largest/smallest proportion of the figures (1).
1 mark for each way identified (2 marks max). 1 mark is available for presenting the results
for ‘do you have a bank account’ (2 marks max).
Up to two further marks are available for explaining the way (4 mark max).
(b) PB needs to close some of its branches as more customers use online banking.
Consider the advantages and disadvantages of branch X and branch Y. Recommend
which branch PB should close. Justify your answer. [12]
Level 1 1 mark for each advantage/disadvantage e.g. There are not many banks
nearby to branch X and therefore this means there is little competition. (1 mark
plus 1 Application mark for ‘not many banks nearby’)
Level 2 5 marks for the first level 2 answer and then one extra mark for each
additional level 2 answer up to maximum of 8 marks e.g. There are not many
banks nearby to branch X and therefore this means there is little competition.
Yet as a small town it means the number of customers is limited.
5 marks for level 2 answer plus one application mark for making reference to
‘not many banks nearby’ in the answer.
Possible application marks: bank; takeover another bank; bank accounts; telephone
banking; cell (mobile) phone banking; tourists; long queues; no other competition locally;
deposit and withdraw money; busy in the mornings; not many customers live nearby;
locate in city centre.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
4 (a) Identify and explain four reasons why the information in Appendix 3 may not be an
accurate record of the views of all bank customers. [8]
Content:
• Poor questions/questions not understood
• Restricted sample surveyed
• Biased time of survey
• Unrepresentative age group surveyed/not a random sample
• Only asked in the city centre
• Respondents may not answer honestly.
The marks available for this question are as follows: 4 marks for knowledge; 4 marks for
explanation/analysis.
1 mark for each reason identified (4 marks max). Up to one further mark is available for
explaining how the reason leads to inaccurate results.
Explanation: Unrepresentative age group surveyed (1) which does not represent the
proportion of people in the population who have bank accounts (2).
(b) The Marketing Director of PB Bank wants to promote mobile (cell) phone banking to
its existing customers. Consider the advantages and disadvantages of each of the
following three ways of promoting mobile phone banking. Recommend which option
the Marketing Director should choose. Justify your answer. [12]
Content:
• Advertising on TV – seen by a wide audience; expensive
• Leaflets to customers – direct to potential customers; may be discarded and not read
• Information on website – cheap to advertise; only seen by people who visit the website
Level 1 1 mark for each statement e.g. Leaflets to customers are direct to potential
customers (1 mark).
Level 2 5 marks for the first level 2 answer and then one extra mark for each
additional level 2 answer up to maximum of 8 marks. e.g. leaflets to customers
are direct to the people who might use mobile banking. The leaflet will reach
the target population and are easy to send and can outline the benefits of
checking accounts on the phone. However, the leaflets may be thrown away
and may not be read.
5 marks for level 2 answer plus 1 application mark for answering in the context
of mobile banking.
Possible application marks: bank; bank branches; public limited company; bank
accounts; telephone banking; online banking; financial information from Appendix 2;
questionnaire results from Appendix 3.
There may be other examples in context which have not been included here.
Application Knowledge/Analysis/Evaluation
5 (a) Identify and explain two possible effects on DOTT Bank employees if DOTT Bank was
taken over by PB Bank. [8]
Content:
• Some employees may lose their jobs
• There may be opportunities for promotion/demotion
• Jobs may be changed with different responsibilities added
• Demotivated
• Change in working conditions/pay
• Training implications for employees
• Relocation/move area/move branch.
The marks available for this question are as follows: 2 marks for knowledge; 4 marks for
analysis and 2 marks for application.
Possible application marks: bank; 15 000 employees; lack of good communication; 1000
PB branches; 250 DOTT branches; 1250 combined branches; branches; area manager;
deputy branch manager; branch manager.
There may be other examples in context which have not been included here.
1 mark for each effect identified plus 2 explanation marks for each effect plus 1 application
mark. (4 marks × 2 effects)
Explanation: Some employees may lose their jobs (1) because there may be other
employees at PB Bank who can do their job. (2) PB will want to make cost
savings and there may be, for example, counter staff at the bank who are no
longer needed as branches may be merged. (3) (Plus 1 application mark for
answering in the context of branch banks).
(b) Consider the advantages and disadvantages to PB Bank of taking over DOTT Bank.
Recommend whether PB should take over DOTT Bank. Justify your answer by using
appropriate calculations based on the data in Appendix 2. [12]
Content:
Takeover – Have existing customers of DOTT Bank; quick method of expansion;
Expensive;
Internal growth – low cost; slower process; more control over growth.
Level 1 1 mark for each statement e.g. to takeover of DOTT Bank would be a quick
method of expansion for the bank (1 mark)
Level 2 5 marks for the first level 2 answer and then one extra mark for each
additional level 2 answer up to maximum of 8 marks e.g. the current ratio for
DOTT Bank is 4/5 whereas the current ratio for PB Bank is 1.5. 6 marks for
two level 2 calculations.
Knowledge/Analysis/Evaluation
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
1 TWH makes a range of toys using batch production. TWH’s Managing Director, Dylan, plans to
invest in new technology to reduce average costs. ‘It’s the only way to increase efficiency as I do
not know how we can improve employees’ motivation’ he said. Dylan cannot decide on whether it
would be better to use retained profits or a long term loan as the source of finance.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two possible advantages to TWH of using batch production.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two ways that TWH could improve the motivation of its employees.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) TWH can either use retained profit or a long term loan to finance the purchase of new
technology. Which option do you recommend TWH should use? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
2 Ramford is a private limited company. It has four factories which make a wide range of food
products including breakfast cereal and ice cream. The Finance Director is worried about the
company’s financial performance. She has read that many businesses failed in the last year. ‘I
think we are suffering from diseconomies of scale’ she said. Ramford’s directors have decided to
cut the number of different products it makes from 80 to 10.
2013 2014
Revenue (sales) ($m) 200 150
(Net) profit ($m) 70 60
Capital employed ($m) 280 300
(Net) profit margin 35% ?
Return on Capital Employed 25% ?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
Cause 1: ....................................................................................................................................
...................................................................................................................................................
Cause 2: ....................................................................................................................................
...............................................................................................................................................[2]
(c) Identify and explain two diseconomies of scale that Ramford might be experiencing.
Diseconomy 1: ...........................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Diseconomy 2: ...........................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two factors that Ramford should consider when deciding which products
to remove from its product range.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Finance Director is right to be worried about the financial performance of
Ramford in 2014? Justify your answer using the data in Table 2 and appropriate ratios.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
3 Grimshaw manufactures mobile (cell) phones for the mass market. Last year its market share
increased by 3%. The Managing Director is planning to set up a new factory in country T to supply
the mobile phone market in that country for the first time. Grimshaw plans to sell a new model of
mobile phone. The Managing Director has asked for market research to be done. He said: ‘As a
multinational, we can set up a new factory anywhere; I want to know whether the Government of
country T will offer us any help to build our factory there.’
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two advantages to Grimshaw of developing new products.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think the Government of country T should help businesses such as Grimshaw set up
in its country? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
4 Tebo has recently been made redundant from his job as a car mechanic. He is thinking of setting
up his own business. Even though he has no management experience, he knows that managing
cash flow will be important to the success of the business. Tebo is considering whether to apply for
a FIXIT franchise. This franchise would cost $15 000, which would use all of his savings. FIXIT is a
car repair franchise, with 36 franchisees.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) Identify two functions of management that Tebo might have to perform.
Function 1: .................................................................................................................................
...................................................................................................................................................
Function 2: .................................................................................................................................
...............................................................................................................................................[2]
(c) Explain why managing cash flow will be important for Tebo’s business.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[4]
(d) Identify and explain two factors Tebo should consider when deciding where to locate his
business.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
(e) Do you think that buying a FIXIT franchise is the best way for Tebo to start his business?
Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[6]
BLANK PAGE
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2015 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.
Clear understanding [2] e.g. Total cost divided by the total number of units produced
Some understanding [1] e.g. cost to make one product/cost per unit
(b) Calculate the output per employee per week in 2014. [2]
(c) Identify and explain two possible advantages to TWH of using batch production. [4]
Application marks may be awarded for appropriate use of the following: relevant use of
numbers, toys, motivation, average cost, efficiency, new technology
Do not accept cheaper, faster, more output (if just this is stated)
(d) Identify and explain two ways that TWH could improve the motivation of its
employees. [6]
Note: other options acceptable e.g. fringe benefits (allow only once), job enrichment,
promotion
Do not accept work harder alone as analysis because a reason for this must be given
Application marks may be awarded for appropriate use of the following: relevant use of
numbers, toys, average costs, efficiency, new technology.
(e) TWH can either use retained profit or a long term loan to finance the purchase of new
technology. Which option do you recommend TWH should use? Justify your answer.
[6]
Application marks may be awarded for appropriate use of the following: relevant use of
numbers, toys, lower average costs.
Clear understanding [2] e.g. a business whose shares cannot be sold to the general public
[2] Or shares only sold to family and friends [2]
Some understanding [1] e.g. outlines general features of limited companies e.g. have limited
liability/separate legal identity from owners/can sell shares/incorporated
Note: points could refer to either new or established business. Accept any reasonable
answer.
(c) Identify and explain two diseconomies of scale that Ramford might experience. [4]
Application marks may be awarded for appropriate use of the following: calculations/use of
numbers, factories, 80 products, reduced profit, financial performance, wide range, private
limited company.
(d) Identify and explain two factors that Ramford should consider in deciding which
products to remove from its product range. [6]
Application marks may be awarded for appropriate use of the following: calculations/use of
numbers, food, cereal, ice cream, factories, 80 to 10 products, reduce profit, financial
performance.
(e) Do you think the Finance Director is right to be worried about the financial
performance of Ramford in 2014? Justify your answer using the data in Table 2 and
appropriate ratios. [6]
Points include:
• Sales down [k] which is a 25% fall [app + an]
• (net) profit down [k] by $10m [app]
• Profit margin increased [k] to 40% [app+ an] showing better control of fixed costs [an]
• ROCE has fallen [k] to 20% [app + an] showing a lower return on each $ invested [an]
• Financial Director is aware of the problem [k] as they are cutting the number of products
to 10 [app]
Note: using percentage calculation or ratio award application and analysis. Max 1 for
application.
Application marks may be awarded for appropriate use of the following: appropriate
calculations/use of numbers, diseconomies of scale, four factories, 80 to 10 products
Clear understanding [2] where there are a large number of (potential) customers willing to
buy product(s). Allow: a large number of sales of a product
Some understanding [1] lots of customers/sales/buyers/people, shown by comparison to
niche
Clear understanding [2] e.g. percentage of the total market sales [1] held by one brand or
business [+1] OR business sales/total market sales × 100
Some understanding [1] e.g. share of all sales made/percentage of customers a business
has
(c) Identify and explain two advantages of market research to Grimshaw. [4]
Application marks may be awarded for appropriate use of the following: mobile phones,
market share increased (by 3%), mass market, factory, new model, multinational,
technology, country T
(d) Identify and explain two advantages to Grimshaw of developing new products. [6]
(e) Do you think the Government of country T should help businesses such as Grimshaw
set up in its country? Justify your answer. [6]
Application marks may be awarded for appropriate use of the following: mobile phones, mass
market, factory, new model, can build anywhere, multinational.
Note: Candidate’s final decision can be either for or against the statement.
Clear understanding [2] e.g. The worker is no longer required through no fault of their own [2]
Some understanding [1] e.g. means that his job role has gone [1]
Note: If the answer includes dismissed, fired or sacked plus any relevant point maximum 1
mark
(b) Identify two functions of management that Tebo might have to perform. [2]
Do not accept any task which can be completed by any employee e.g. pay bills, training
(c) Explain why managing his cash flow will be important for Tebo’s business. [4]
Application marks may be awarded for appropriate use of the following: car repair, no
management experience, $15 000/all his savings, new business, FIXIT franchise.
(d) Identify and explain two factors Tebo should consider when deciding where to locate
his business. [6]
Note: accept franchisor as the supplier if it is made clear that they supply
materials/equipment.
Application marks may be awarded for appropriate use of the following: franchisees, car
repair, $15 000/all his savings, new business, redundant, FIXIT franchise, cash flow
important, workshop.
(e) Do you think that buy a FIXIT franchise is the best way for Tebo to start his business?
Justify your answer. [6]
Knowledge [1] – award 1 mark for identification of relevant point (s) [max 1]
Application [1] – award 1 mark if relevant reference made to Tebo/FIXIT business
Analysis [2] – award up to 2 marks for relevant development of point(s)
Evaluation [2] – justified decision as to whether buying a FIXIT franchise is the best way for
Tebo to start his business
Application marks may be awarded for appropriate use of the following: 36 (franchisees), car
repair, no management experience, $15 000/all his savings, cash flow important.
Note: Candidate’s final decision can be either for or against the statement.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (LK/AR) 97973/3
© UCLES 2015 [Turn over
2
Camper Companions (CC) is a large public limited company set up 20 years ago in country X. It
manufactures a wide range of camping equipment. Most of its customers own a tent or caravan.
Originally the company had one factory but now it has expanded to three factories. The directors want
the company to continue to expand. Recently the directors of CC have considered merging with a
competitor in country Z which manufactures a similar range of camping equipment.
Each of CC’s three factories employs 100 skilled workers. Most of these workers are part-time and they
are paid lower wage rates than workers in other similar businesses. The factories use many machines
in the production of CC’s products. The directors have not allowed workers to be members of a trade
union but they are thinking of changing this decision.
CC only sells its camping equipment in country X but the directors plan to start manufacturing and
selling the equipment in several countries including country Z. Government grants are available for
building new factories in country Z.
Appendix 1
awning
camping chairs
water carrier
camping lights
camping cooker
camp table
Appendix 2
total revenue
$
total cost
Appendix 3
We have a large number of loyal customers who buy our camping equipment in country X. However,
we need to maintain our competitiveness and start to sell in other countries.
As a public limited company we have to maintain profitability. If CC’s share price falls we could be at
risk of a takeover.
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (LK/AR) 97972/4
© UCLES 2015 [Turn over
2
1 (a) Identify and explain one advantage and one disadvantage to CC of being a public limited
company.
Advantage: ................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage: ...........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) CC needs to communicate a new health and safety regulation to its factory workers. Consider
the advantages and disadvantages of each of the following three ways CC could use.
Recommend the most effective way to use. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
CC website: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
2 (a) CC’s Marketing manager wants to carry out market research. Identify and explain two factors
which could influence the accuracy of the market research data.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) CC’s bestselling product is a good quality camping cooker which is similar to those produced
by competitors. Explain how each of the following three elements of the marketing mix could
be used to market CC’s camping cooker. Justify why each element is important to the success
of this product.
Price: .........................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Promotion: ................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Place: ........................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
3 (a) Identify and explain two benefits to CC workers of joining a trade union.
Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
BLANK PAGE
total revenue
$
total cost
total revenue
$
total cost
(b) The charts on the opposite page show the break-even point using a price of $40 per cooker
and variable cost of $20 per cooker.
Show what happens to the break-even point for each of the following options by drawing on
each chart on the opposite page:
• Option 1 – Increase the price of the cooker to $60
• Option 2 – Decrease the variable cost of the cooker to $10
Consider these two options for increasing the profitability of the cooker. Recommend which
option the directors should choose. Justify your answer.
Option 1: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Option 2: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
4 (a) Identify and explain one advantage and one disadvantage to CC of employing skilled workers
in the factories.
Advantage: ................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage: ...........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) CC wants to expand into country Z and has the choice of merging with a competitor in country
Z or setting up its own factory in country Z. Consider these two options and recommend which
one CC should choose. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2015 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.
1 (a) Identify and explain one advantage and one disadvantage to CC of being a public
limited company. [8]
Award one mark for each advantage/disadvantage (maximum of two), such as:
Advantages:
• Raise large amounts of capital through share issue
• No limit to the number of shares sold
• Shares can be sold to the public
• Shares can be sold on the stock exchange
• Limited liability
• Company has separate legal identify for shareholders
• Continuity of company if shareholder dies
Disadvantages:
• Accounts are published
• Risk of takeover
• Divorce between ownership and control
• Loss of control as increased number of shareholders
Indicative response:
Shares can be sold on the stock exchange (k) and this means that CC can raise large
amounts of capital to finance the building of new factories in other countries (ap). CC will not
have to pay interest on this source of finance and so costs of producing camping equipment
are lower (ap) as only dividends may be paid when profits are gained (an).
Possible application marks: recognition that the plc is large; business wants to expand;
manufactures camping equipment; customers have tents or caravans; merging with a
competitor; three factories; capital intensive method of production; camping cooker; prices
just below competitors prices; CC share price; takeover; equipment listed from Appendix 1.
There may be other examples in context which have not been included here.
(b) CC needs to communicate a new health and safety regulation to its factory workers.
Consider the advantages and disadvantages of each of the following three ways CC
could use. Recommend the most effective way to use. Justify your answer. [12]
Advantages Disadvantages
Knowledge/Analysis/Evaluation
Level 1 1 mark for each L1 statement (max of 3 marks) e.g. Posters seen by target
workers as they will be in the factory and pass by the noticeboard.
Level 2 one L2 explanation can gain 4 marks and a further mark can be awarded for
each additional L2 explanation (max 6 marks) e.g. Posters seen by target
workers as they will be in the factory and pass by the noticeboard. This is a cost
effective method to use as the posters will be cheap to produce. However, it will
only be seen by factory workers who pass by those particular noticeboards and
there may be many workers who are not working near or walk past these
noticeboards and will not see the poster. (4 marks for L2 answer).
Level 3 for L3 to be awarded there needs to be at least two L2 marks awarded and then
a recommendation which justifies the most effective method to use.
2 (a) CC’s Marketing manager wants to carry out market research. Identify and explain two
factors which could influence the accuracy of the market research data. [8]
Award one mark for each relevant factor (maximum of two), such as:
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of how it can be ensured that the information is accurate.
Indicative response:
To ensure the information is up-to-date [k] because if the market research had been carried
out a few years earlier then customer camping habits may have changed [an]. The Marketing
manager needs to ensure that the information has been carried out recently so it reflects
current camping habits (ap) and then CC will know whether the current customers are happy
with its camping equipment (ap).
(b) CC’s bestselling product is a good quality camping cooker which is similar to those
produced by competitors. Explain how each of the following three elements of the
marketing mix could be used to market CC’s camping cooker. Justify why each
element is important to the success of this product. [12]
Knowledge/Analysis/Evaluation
Justification of why the description of the element of the marketing mix will lead
to successful sales of the camping cooker.
Level 1 1 mark for each L1 statement (max of 3 marks) e.g. Competitive pricing
Level 2 one L2 explanation can gain 4 marks and a further mark can be awarded for
each additional L2 explanation (max 10 marks) e.g. Competitive pricing needs
to be used with the marketing of the camping cooker as there are many
competitors and so CC cannot have very different prices to the other cookers.
(4 marks for L2 answer).
3 (a) Identify and explain two benefits to CC workers of joining a trade union. [8]
Award one mark for each relevant benefit (maximum of two), such as:
Award a maximum of three additional marks for each explanation of the benefits – 2 of
which must be applied to this context.
Indicative response:
Being a member of a trade union gives strength in numbers so workers are more likely to
achieve their demands [k] rather than if one worker tries to achieve the demands on their
own (an). At the moment CC does not allow a worker to be a member of a trade union (ap).
Production workers are only paid low wages and they may want to be members of a trade
union in order to gain a pay rise (ap).
Possible application marks: paid lower wages than wages paid to workers in similar
businesses; part-time workers; use machinery in the factory; in country X; manufactures
camping equipment; merging with a competitor; three factories; 100 skilled workers in each
factory; capital intensive method of production; not allowed trade union membership;
country Z; camping cooker; public limited company; takeover; equipment listed from
Appendix 1.
There may be other examples in context which have not been included here.
(b) Show what happens to the break-even point for each of the following options by
drawing on each chart. Consider these two options for increasing the profitability of
the camping cooker. Recommend which option the directors should choose. Justify
your answer. [12]
B/E at a lower output – increase profit – But – will sales be maintained with higher price?
Total revenue
$
Total cost
20 000 Fixed cost
B/E at a lower output – takes longer to gain higher profit – But – cheaper materials may
reduce quality
$ Total revenue
Total cost
20 000
Fixed cost
Knowledge/Analysis/Evaluation
9–10 marks for well justified recommendation as to the best option to choose.
7–8 marks for some limited judgement shown in recommendation as to the
best option to choose.
Level 1 1 mark for each L1 statement – increased price may lead to increased profit.
(max of 3 marks)
Level 2 one L2 explanation can gain 4 marks and a further mark can be awarded for
each additional L2 explanation. (max 6 marks) Break-even output of option 1 is
500. (L2)
Award up to 2 marks for application – one mark for each correct line on the graphs
(label not required)
4 (a) Identify and explain one advantage and one disadvantage to CC of employing skilled
workers in the factories. [8]
Award one mark for each relevant advantage/disadvantage (maximum of two), such as:
Indicative response:
Employing skilled workers will increase labour productivity (k) and this means there will be a
greater number of camping cookers produced (ap) and at a lower unit cost (an). This may
lead to higher profits and higher dividends paid to shareholders (ap).
(b) CC wants to expand into country Z and has the choice of merging with a competitor in
country Z or setting up its own factory in country Z. Consider these two options and
recommend which one CC should choose. Justify your answer. [12]
Advantages Disadvantages
Merging with a Already established in the Less control over other company
competitor in market May be disagreements between staff
country Z Know target market well in the two firms
Existing workforce of May incur redundancy costs
competitor has necessary
skills
No need to build own factory
May be cheaper
Setting up its own Choose location etc. Little knowledge of new market
factory in country Z New equipment will be up to May be different culture
date Costs of setting up may be more
Choose own staff expensive
Government support Need to recruit new staff
Knowledge/Analysis/Evaluation
Level 1 1 mark for each L1 statement (max of 3 marks) e.g. The company is already
established in the market.
Level 2 one L2 explanation can gain 4 marks and a further mark can be awarded for
each additional L2 explanation (max 6 marks) e.g. The company is already
established in the market therefore it will be familiar with the culture and trends
in the camping market in country Z. This will save CC time and money in
carrying out market research as it will not need to do this. (4 marks for L2
answer + 1 application mark for mentioning trends in the camping market in
country Z).
Level 3 For L3 to be awarded there needs to be at least two L2 marks awarded and
then a recommendation which justifies which option CC should choose.
Possible application marks: existing business is already large; set up 20 years ago; in
country X; manufactures camping equipment; three factories; 100 skilled workers in each
factory; capital intensive method of production; not allowed trade union membership; public
limited company; equipment listed from Appendix 1; Government grants available; similar
range of camping equipment.
There may be other examples in context which have not been included here.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (NF/AR) 97916/2
© UCLES 2015 [Turn over
2
1 Gomez is the manager of a small computer repair business. Table 1 shows some costs and prices
for his business. As it is a competitive market, Gomez knows it is important to maintain customer
loyalty and revenue. Gomez knows that a lower break-even point would help improve profits. He
thinks the best way to lower the break-even point is to raise prices.
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(c) Using the information in Table 1, draw a break-even chart for Gomez’s business. [4]
5000
4500
4000
3500
3000
costs and revenue
($ per month) 2500
2000
1500
1000
500
0
0 25 50 75 100 125 150
number of customers per month
(d) Identify and explain two methods that Gomez could use to maintain customer loyalty.
Method 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Gomez thinks the best way to lower the break-even point is to raise prices. Do you agree?
Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
2 Country S is enjoying an economic boom. During this time, businesses have increased their profits
and unemployment has fallen. The only problem is inflation. All Active is a private limited company.
It owns 20 sport and fitness clubs in country S. The Managing Director said: ‘This is a good time
to expand by opening 5 more clubs. Finding the right locations is important. We will need to recruit
more employees.’ He cannot decide whether it would be an advantage for All Active to become a
public limited company.
Stage 1: ....................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [4]
(d) Identify and explain two factors that All Active should consider when deciding on the location
of the new clubs.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Consider the advantages and disadvantages for All Active of being converted to a public
limited company. Do you think All Active should become a public limited company? Justify
your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
3 Si and Ramon are friends. They want to set up a photography business. They would take pictures
at weddings, birthdays and other special events. The business will be a partnership. Based on their
primary market research, Si believes there is enough demand. Ramon has produced a business
plan which shows they need $8000 for a shop and $4000 for equipment. They plan to spend $500
on promotion, but cannot agree on the best method to use.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two methods of primary market research that Si and Ramon might have used.
Method 1: ..................................................................................................................................
(c) Identify and explain two possible sources of finance that they could use to obtain the
equipment.
Source 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Source 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [4]
(d) Identify and explain two advantages to Si and Ramon of having a business plan.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Advantage 2: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Consider two methods of promotion that would be suitable for Si and Ramon to use. Which of
these two methods would be the most appropriate? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
4 Javid is a company that manufactures a range of luxury chocolates using batch production. Over
the past year, profit has fallen due to increased competition. In order to cut costs, the Finance
Director has suggested the company introduces new technology into the production process. The
Human Resources Director is not sure that workers would benefit from the introduction of new
technology.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [2]
(b) Identify two advantages (other than cutting costs) to the company of using new technology.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Advantage 2: ............................................................................................................................
.............................................................................................................................................. [2]
(c) Identify and explain two reasons why the quality of chocolates might be important to this
company.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [4]
(d) Identify and explain two problems that a fall in profit might cause for the company.
Problem 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Problem 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
(e) Do you think that the introduction of new technology would benefit Javid’s workers? Justify
your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [6]
BLANK PAGE
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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2015 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.
Clear understanding [2] Income/money made by the business [1] from the sale of goods or
services [1] OR Quantity sold × price per unit [2]
Clear understanding [2] costs that change [1] with the level of output produced/sales made
[1]
Some understanding [1] e.g. costs that change [1] or costs that vary with sales/output [1]
Do not accept the phrase ‘costs that vary’ as this is re-wording the question
(c) Using the information in Table 1, draw a break even chart for Gomez’s business. [4]
(d) Identify and explain two methods that Gomez could use to maintain customer loyalty.
[6]
Knowledge [2 × 1] – award one mark for each method identified [max 2]
Application [2 × 1] – award 1 mark if relevant reference made to Gomez’s business
Analysis [2 × 1] – award 1 mark for each relevant explanation
(e) Gomez thinks the best way to lower the break-even point is to raise prices. Do you
agree? Justify your answer. [6]
Application marks may be awarded for appropriate use of the following: use of break-even
information, competitive market, small computer shop, customer loyalty.
Clear Understanding [2] – strong rise in level of economic activity OR Period of time when
GDP rising rapidly
Some Understanding [1] – e.g. economy doing well [high GDP] or rise in level of economic
activity or GDP rising
Do not credit characteristics of economic boom as these are stated in the stem
(c) Explain how falling unemployment might affect All Active. [4]
(d) Identify and explain two factors that All Active should consider when deciding on the
location of the new clubs. [6]
Application marks may be awarded for appropriate use of the following: equipment,
sport/fitness, gym, trainers
(e) Consider the advantages and disadvantages for All Active of being converted to a
public limited company? Do you think All Active should become a public limited
company? Justify your answer. [6]
Knowledge [1] – award 1 mark for identification of relevant issue(s). Positive or negative
points allowed [max 1]
Application [1] – award 1 mark if relevant reference made to All Active’s business
Analysis [2] – award up to 2 marks for relevant development of point(s)
Evaluation [2] – justified decision made as to whether All Active should become a public
limited company. Candidate’s final decision can be either for or against the statement.
Application marks may be awarded for appropriate use of the following: 5 more clubs, private
limited company, fitness, 20 clubs, increasing profits
Clear understanding [2] – 2 [or more] people who agree to own and run a business together
[2]
Some understanding [1] – e.g. 2 or more people run a business
Do not accept features
(b) Identify two methods of primary market research that Si and Ramon might have used.
[2]
Application [2 × 1] – award 1 mark for each relevant method
Points could include: questionnaire/survey, interview, consumer panel, observation, focus
group
Note: Do not accept field research/internet – too vague
(c) Identify and explain two possible sources of finance that they could use to obtain the
equipment. [4]
Application marks may be awarded for appropriate use of the following: new business,
$4000, partnership, cameras or examples of relevant equipment [not equipment on its own],
business plan
(d) Identify and explain two advantages to Si and Ramon of having a business plan. [6]
(e) Consider two methods of promotion that would be suitable for Si and Ramon to use.
Which of these two methods would be most appropriate? Justify your answer. [6]
Clear understanding [2]: e.g. products are made in groups/blocks [1] followed by another
block/group [1]
Some understanding [1]: identifies one distinct feature of batch e.g. made in (small) groups
or sets
Do not accept ‘batch’ as part of answer as stated in question.
(b) Identify two advantages (other than cutting costs) to the company of using new
technology. [2]
Points include:
• less errors/wastage/consistent quality
• less risk of injury
• higher output
• able to make new products
• speed of production/efficiency
• 24/7 operation
Note: do not accept less wages or less employees as these are examples of cutting costs
(c) Identify and explain two reasons why the quality of chocolates might be important to
this company. [4]
Application marks may be awarded for appropriate use of the following: competitive market,
luxury product, food products, taste.
(d) Identify and explain two problems that a fall in profits might cause for the company.
[6]
Knowledge [2 × 1] – identification of relevant problem [max 2]
Application [2 × 1] – award 1 mark for each relevant reference made to the business
Analysis [2 × 1] – award 1 mark for each relevant explanation
Application marks may be awarded for appropriate use of the following: new technology,
chocolate, cutting costs, increased competition.
Profit is not used to pay costs therefore do not accept answers which suggest they can no
longer afford items.
Do not accept solutions e.g. Making workers redundant.
(e) Do you think that the introduction of new technology would benefit Javid’s workers?
Justify your answer. [6]
Knowledge [1] – award 1 mark for identification of relevant issue(s). Positive or negative
points allowed [max 1]
Application [1] – award 1 mark if relevant reference made to Javid’s business
Analysis [2] – award up to 2 marks for relevant development of point(s)
Evaluation [2] – justified decision made as to whether new technology would benefit Javid’s
workers. Candidate’s final decision can be either for or against the statement.
Note: Do not accept points such as ‘more efficient’ unless clearly link issue to employees.
Application marks may be awarded for appropriate use of the following: chocolates, sales
falling, need to cut costs, increased competition
Note: Answer must focus on the benefit or not to the workers
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (ST/AR) 97965/1
© UCLES 2015 [Turn over
2
David is a successful entrepreneur. He set up Delicious Delights (DD) as a private limited company
10 years ago in country X. David invested all of his own savings when he set up DD and he is still
the major shareholder. David is the Managing Director and works 7 days a week. The company has
increased profits every year as David develops a new range of cakes each year. David has appointed
managers to control each department (see Appendix 1) and the company employs 125 people.
DD employs many employees for the production of cakes. Large ovens are used to bake the cakes.
David wants to increase production efficiency. He is considering the following two options.
Option A
Provide more training for the existing production employees. This would involve on-the-job training
provided by the most experienced employees. David estimates efficiency would increase by 10%.
Option B
Change the production process to an automated production line. This would require an investment
of $8m and only 10 employees would be required to operate the machinery. The other production
employees would be made redundant. Off-the-job training would be required for the remaining
10 employees.
Appendix 1
Organisational structure of DD
Appendix 2
2013 2014
Appendix 3
Hi
I have been looking at our sales figures for cakes and I am constantly thinking of new ways of selling to
customers. Customers usually buy our cakes from large supermarkets and small food shops, but I think
we could start to sell our cakes directly to customers using e-commerce. There are many cost savings
to be made from using e-commerce but would this be a suitable method for our cakes?
We have a large number of loyal customers in country X. However, our competitors are starting to sell
cakes in large quantities to supermarkets in other countries. Would this be a better way of increasing
sales than using e-commerce?
BLANK PAGE
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be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (ST) 97967/1
© UCLES 2015 [Turn over
2
1 (a) Identify and explain two characteristics David needs to be a successful entrepreneur.
Characteristic 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Characteristic 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) David has appointed a manager to control each department as shown in Appendix 1.
Identify and explain three management functions of the Operations manager. Which do you
think is the most important management function? Justify your answer.
Function 1: ................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Function 2: ................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Function 3: ................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
2 (a) Identify and explain two ways in which marketing is important for DD.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) Consider the advantages of using e-commerce and the advantages of selling to supermarkets
in other countries. Recommend which way DD should use to increase sales. Justify your
answer.
E-commerce: ............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
3 (a) The company Balance Sheet helps David assess the performance of the business.
(i) Calculate the current ratio and acid test ratio for 2014.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
.......................................................................................................................................[4]
(ii) Compare your two ratio results with those of 2013 (see Appendix 2).
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
.......................................................................................................................................[4]
(b) David wants to increase efficiency in his factory. Consider Option A and Option B and then
recommend which one he should choose. Justify your answer.
Option A: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Option B: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
4 (a) Identify and explain four factors DD should consider when packaging cakes if they are
exported.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Factor 3: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Factor 4: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[8]
(b) External factors can affect the profitability of a company. For each of the following changes
consider how it might affect DD’s profit. Which change is likely to have the greatest effect on
DD’s profit? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Television programme highlighting the effects on health of eating too many cakes: .................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Conclusion: ................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
BLANK PAGE
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2015 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.
1 (a) Identify and explain two characteristics David needs to be a successful entrepreneur.
[8]
Award one mark for each relevant characteristic (maximum of two), such as:
• Hard working
• Risk taker
• Creative
• Optimistic
• Self-confident
• Innovative
• Independent
• Effective communicator
• Forward thinker
• Determined
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of why these characteristics are needed to be a successful
entrepreneur.
Indicative response:
Hard working (k) as the business has only been established for 10 years and has non-current
assets worth $100m (ap). David worked long hours 7 days a week to find customers so the
business has grown (ap). He has had to work hard to manage the business effectively so
that it is successful (an).
There may be other examples in context which have not been included here.
(b) David has appointed a manager to control each department as shown in Appendix 1.
Identify and explain three management functions of the Operations manager. Which
do you think is the most important management function? Justify your answer. [12]
Knowledge/Analysis/ Evaluation
Level 1
1 mark for each L1 statement (max of 3 marks), e.g. the Operations Manager needs to
control the department.
Level 2
One L2 explanation can gain 4 marks and a further mark can be awarded for each additional
L2 explanation (max 6 marks), e.g. the Operations Manager needs to control the department.
This will involve ordering the ingredients to ensure that the planned production of cakes can
be made otherwise bakers may not be able to bake the batches of cakes ordered. (4 marks
for L2 answer + 1 application mark for mentioning bakers and making cakes.)
Level 3
For L3 to be awarded there needs to be at least two L2 marks awarded and then a
recommendation which justifies the most important management function, e.g. planning will
be the most important management function because if the Operations Manager does not
plan efficiently then workers may not work effectively. They could be waiting for ingredients
to arrive and not be able to work. This is more important than commanding the workers to do
their work as if they do not have ingredients then commanding them to work will not be
effective.
Award up to 2 additional marks for relevant application.
Possible application marks: cake manufacturing; constantly develops a new range of cakes;
e-commerce; Figures from Appendix 2; new markets abroad; large supermarkets; small
food shops; 125 workers; may need to make some workers redundant; automated
production line; efficiency increases by 10% for option A; investment of $8m; 10 production
employees for option B.
There may be other examples in context which have not been included here.
2 (a) Identify and explain two ways in which marketing is important for DD. [8]
Award one mark for each relevant way (maximum of two), such as:
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of the ways marketing is important.
Indicative response:
To identify customer needs [k] because David needs to know what types of cakes to bake
[ap]. By producing the types of cakes which customers most want to buy will lead to higher
sales [an]. Therefore the company is more likely to be successful and return a good dividend
to David and his shareholders [ap].
Possible application marks: cake manufacturing; food; shareholders; started 10 years ago in
country x; constantly develops a new range of cakes; e-commerce; Figures from Appendix
2; new markets abroad; large supermarkets; small food shops.
There may be other examples in context which have not been included here.
(b) Consider the advantages of using e-commerce and the advantages of selling to
supermarkets in other countries. Recommend which way DD should use to increase
sales. Justify your answer. [12]
Knowledge/Analysis/ Evaluation
Level 1
1 mark for each L1 statement (max of 3 marks), e.g. David can sell to a wider market.
Level 2
One L2 explanation can gain 4 marks and a further mark can be awarded for each additional
L2 explanation (max 6 marks), e.g. David can sell to a wider market. This will allow the
company to increase production and expand the business. If the cost of cake ingredients fall
as output increases then this will help David to increase profits further. (4 marks for L2
answer + 1 application mark for mentioning cake ingredients.)
Level 3
For L3 to be awarded there needs to be at least two L2 marks awarded and then a
recommendation which justifies which is the best way. Overall there will be higher costs
involved in expanding the business by selling cakes online especially as the company sell
food items. It will be difficult to maintain the quality of the cakes when they are posted out to
customers. (L3) So although they can sell to a wider market they should take this option
because of the difficulties of maintaining the quality of the cakes. (L3) It is much easier to
deliver large quantities of cakes to supermarkets abroad as delivery will be in specialised
containers to keep the cakes fresh (L3) and administration costs will be kept low by fewer but
larger orders to process. (L3)
There may be other examples in context which have not been included here.
3 (a) The company Balance Sheet helps David assess the performance of the business.
(i) Calculate the current ratio and acid test ratio for 2014. [4]
(ii) Compare your two ratio results with those of 2013 (see Appendix 2) [4]
2 marks for each correct answer; 1 mark if correct method/formula but incorrect answer
(ii) Application + Analysis [2 × 2] – award one application mark for the comparison between
the figures and one analysis mark for each explanation of the calculation result from (i)
Indicative response:
The current ratio is lower [ap] because the current liabilities have increased [an].
The acid test ratio is higher (ap) because the amount of inventories has fallen so less
working capital is being tied up in inventories [an].
NB do not reward ‘better’ or ‘worse’ for the comparison of the figures but an explanation
of why the figure is better or worse can be credited.
(b) David wants to increase efficiency in his factory. Consider Option A and Option B and
then recommend which one he should choose. Justify your answer. [12]
Advantages Disadvantages
Knowledge/Analysis/ Evaluation
Level 1
1 mark for each L1 statement (max of 3 marks), e.g. only needs to train existing workers and
so it is cheaper.
Level 2
one L2 explanation can gain 4 marks and a further mark can be awarded for each additional
L2 explanation (max 6 marks), e.g. only needs to train existing workers and so it is cheaper.
Also by using on-the-job training methods then training costs will not be high. However,
output only increases by 10% and so not much additional output of cakes will be gained. (4
marks for L2 answer + 1 application mark for mentioning output of cakes.)
Level 3
For L3 to be awarded there needs to be at least two L2 marks awarded and then a
recommendation which justifies which is the best option to choose.
Award up to 2 additional marks for relevant application.
There may be other examples in context which have not been included here.
4 (a) Identify and explain four factors DD should consider when packaging cakes if they are
exported. [8]
Award one mark for each relevant factor (maximum of four), such as:
Award a maximum of one additional mark for each explanation of the factor in context.
Indicative response:
Contains the correct information about the cakes for that country it is being exported to [ap]
because without the correct information the company could be charged with misleading
information. [an]
Possible application marks: transporting over long distances; constantly develops a new
range of cakes; food; labelling; ingredients; contamination; sell-by date; easily
damaged/fragile; perishable; e-commerce; Figures from Appendix 2; new markets abroad;
large supermarkets; small food shops.
There may be other examples in context which have not been included here.
(b) External factors can affect the profitability of a company. For each of the following
changes consider how it might affect DD’s profit. Which change is likely to have the
greatest effect on DD’s profit? Justify your answer. [12]
Knowledge/Analysis/ Evaluation
Level 1
1 mark for each L1 statement (max of 3 marks), e.g. Increasing GDP means more people
have jobs and incomes are higher.
Level 2
One L2 explanation can gain 4 marks and a further mark can be awarded for each additional
L2 explanation (max 6 marks), e.g. increasing GDP means more people have jobs and
incomes are higher. Higher incomes means more luxury products are bought and therefore
people may buy more cakes to treat their family leading to increased demand for DD’s cakes.
(4 marks for L2 answer + 1 application mark for mentioning more cakes being bought.)
Level 3
For L3 to be awarded there needs to be at least two L2 marks awarded and then a
recommendation which justifies which change has the greatest effect on profits e.g. higher
GDP will probably have the greatest effect on profits as it will lead to higher demand for the
cakes.(L3) The television programme may have little effect as it depends on how many
people watched it and how many people believed what they were being told. (L3) The rising
cost of ingredients could be passed on to the customer and therefore there will be little effect
on profits. (L3) It depends on how bad the harvest is and how big an increase there is in the
costs of the ingredients. So overall increasing GDP is likely to have the greatest effect on
profits. (L3)
Possible application marks: constantly develops a new range of cakes; ingredients; food;
increased production workers; $8m investment; perishable products; luxury products;
e-commerce; Figures from Appendix 2; new markets abroad; large supermarkets; small
food shops.
There may be other examples in context which have not been included here.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
06_0450_11_2016_1.24
© UCLES 2016 [Turn over
2
1 EDGE makes mobile (cell) phones. It operates in a competitive market. The Marketing manager
believes that because EDGE is good at maintaining customer loyalty demand for its phones is price
inelastic. Its best selling product, Z, is near the end of its product life cycle. The Marketing manager
has to decide whether to spend money on developing new products or use extension strategies
for product Z.
T
X
15%
20%
Z Y
40% 25%
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Explain the possible effect on EDGE if the prices of its products are reduced.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to EDGE of developing new products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two extension strategies that EDGE could use for product Z. Recommend which one
of the two strategies it should choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
2 Bushall is a farm. This primary sector business grows award-winning fruits such as pineapples and
bananas. Bushall has 10 full-time and 50 part-time employees. All part-time job vacancies are
advertised on its website. The Government has introduced legal controls for employment including
a minimum wage of $8.50 per hour and a limit on the number of hours an employee can work each
week. The farm manager has said to Bushall’s owners: ‘Taylor’s theory of motivation might not
work. Our team of employees enjoy what they do. These laws are not good for our employees or
our business!’
(a) Identify two examples (other than farming) of business activity in the primary sector.
Example 1: ........................................................................................................................
(b) Identify two ways (other than its website) that Bushall could use to advertise job vacancies.
Way 1: ...............................................................................................................................
(c) Identify and explain two possible reasons why ‘Taylor’s theory of motivation might not work’
at Bushall.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to Bushall of having part-time employees.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that the new legal controls for employment will benefit Bushall’s employees?
Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
3 Rafiq is the Operations manager at a small factory. The business makes a range of soft drinks
using batch production. Last year Rafiq successfully introduced just-in-time inventory control, based
on an idea from one of the 40 employees. As the business is planning to expand, Rafiq thinks it
would be a good idea to change to flow production.
Revenue X
Expenses Y
Profit 120
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X ........................................................................................................................................
Y ........................................................................................................................................ [2]
(c) Identify and explain two possible reasons why profit is important for this business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to this business of using just-in-time inventory control.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think this business should change to flow production? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
4 Nuwan is a sole trader. He has a specialist sports shop selling a wide range of cricket and tennis
products. His 3 employees are trained to provide good customer service. Nuwan is pleased the
economy is growing but he is worried that interest rates might be increased. He believes his small
business has advantages compared to large retailers. Nuwan would like to improve profit margins
and thinks the best way to do this is to reduce costs.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible features which show that the economy is growing.
Feature 1: .........................................................................................................................
(c) Identify and explain two ways in which an increase in interest rates might affect Nuwan’s
business.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages that Nuwan’s business might have compared to large
retailers.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that the best way for Nuwan to improve profit margins is to reduce costs? Justify
your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
BLANK PAGE
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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2016 series for most Cambridge IGCSE®,
Cambridge International A and AS Level components and some Cambridge O Level components.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
1(d) Identify and explain two advantages to EDGE of developing new products. 6
Knowledge [2 × 1] – award 1 mark for each relevant point identified [max 2]. Application marks may be
Application [2 × 1] – award 1 mark if relevant reference made to EDGE’s business. awarded for appropriate
Analysis [2 × 1] – award 1 mark for each relevant explanation. Relevant points might use of the following:
include: relevant numbers, phones
• Boost sales [k] as existing customers would buy a new phone [an] [app] (features of a phone] price
• Increase market share [k] by attracting customers away from competitor [an] as this is inelastic, customer loyalty,
a competitive market [app] competitive market,
• Able to increase prices [k] as new technical features [app] can lead to greater product X, Y, Z or T,
customer interest [an] technology.
• Create additional consumer interest [k] as better range/more up-to-date products
available [an] Note: Advantages must
clearly be to the business,
• Improve E’s standing/profile in market [k] as seen as able to respond to market
not the consumer.
change [an] which can help maintain consumer loyalty [app]
• Spreading the risk [k] so if product Z doesn’t sell [app] others can help make up the
shortfall in sales [an]
• Need to replace old products [k] as Z is at end of product life cycle [app] this could
help business survival [an]
• Keep up to date with competitors [k].
1(e) Explain two extension strategies that EDGE could use for product Z. Recommend 6
which of the two strategies it should choose. Justify your answer.
Knowledge [1] – award 1 mark for identification of relevant strategy/point(s). Do not accept general
Application [1] – award 1 mark if relevant reference made to EDGE’s business. marketing methods such
Analysis [2] – award up to 2 marks for relevant development of point(s). as lower prices, more
Evaluation [2] – justified decision made as to which option it should choose. Relevant advertising on own.
points might include: Application marks may be
• Introduce new features/new versions [k] awarded for appropriate
• Look for new target markets [k] use of the following: use of
• Rebrand [k] to appeal to new market segments [an] numbers, phones,
• Re-packaging [k] customer loyalty,
• Create new uses [k]. competitive market,
technology.
Evaluation marks cannot
be rewarded if only one
extension strategy
identified.
[Total: 20]
2(a) Identify two examples (other than farming) of business activity in the primary sector. 2
Knowledge [2 × 1] – award 1 mark per example. Points might include: mining, fishing, For 2 marks must be two
forestry, oil extraction, logging. distinct categories.
2(b) Identify two ways (other than its website) that Bushall could use to advertise job 2
vacancies.
Application [2 × 1] – award 1 mark per way. Must be an appropriate
Points might include: local newspaper, local radio, local TV, word-of-mouth, notices on method for a local farm.
farm gate, Job Centre/government agency, specialist magazine, social media/facebook,
recruitment agency, contacting previous employees. Note: Leaflets, flyers e-
mail alone = too vague as
must be contextualised.
2(c) Identify and explain two possible reasons why 'Taylor’s theory of motivation might 4
not work' at Bushall.
Knowledge [2 × 1] – award 1 mark for each relevant reason. Application marks may be
Application [2 × 1] – award 1 mark for each relevant explanation. Relevant points might awarded for appropriate
include: use of the following: team,
• Financial rewards might not motivate workers [k] because they enjoy what they do awards, number of
[app] employees, farm (and / or
• Taylor assumes workers are lazy [k] these workers want to win more awards [app] associated references
• It assumes you can measure output [k] but only have output at harvest time [app] such as bananas,
• Non-financial factors might be more important [k] e.g. Being able to work part-time pineapples, harvest),
[app]. workers enjoy the job.
Part-time, full-time.
Note: $8.50 not allowed.
2(d) Identify and explain two advantages to Bushall of having part-time employees. 6
Knowledge [2 × 1] – identification of relevant advantage [max 2]. Application marks may be
Application [2 × 1] – award 1 mark for each way if relevant reference made to Bushall. awarded for appropriate
Analysis [2 × 1] – award 1 mark for each relevant explanation. Relevant points might use of the following: team,
include: awards, use of numbers,
• More flexible/easier to ask employees to work at busy times [k] such as the picking farm (and / or associated
season [app] when some additional help is needed [an] references such as
• Help to attract new employees [k] because it fits around their other commitments [an], bananas, pineapples,
those who may not want to work full-time [app] harvest) full-time.
• Lower labour costs [k] outside of harvest time [app] as there is less work [an]
• Provide a wide range of skills/knowledge [k]
• May be more motivated [k] and therefore have greater productivity [an]
• Easier to find workers [k].
2(e) Do you think that the new legal controls for employment will benefit Bushall’s 6
employees? Justify your answer.
Knowledge [1] – award 1 mark for identification of relevant issues. Positive or negative Note: candidates must link
points allowed. points to employees, not
Application [1] – award 1 mark if relevant reference made to Bushall’s business. the business.
Analysis [2] – award up to 2 marks for relevant development of point(s). Application marks may be
Evaluation [2] – justified decision made as to whether the new legal controls will benefit awarded for appropriate
Bushall’s employees. Either viewpoint acceptable. Relevant points might include: use of the following: enjoy
• Safer conditions [k] as might require guards on farm machinery [app] so less likely to what they do, team,
have accidents [an] awards, use of numbers -
• Higher pay [k] as minimum wage increased to $8.50 per hour [app] so better able to 10, 50, minimum wage,
satisfy basic needs [an] $8.50, farm, harvest,
• Fewer jobs [k] so less than 10 full-time jobs [app] therefore they become unemployed picking fruit, full/part-time.
[an]
• Less pay [k] as restriction on hours [app] might mean cannot work as long as want
[an].
[Total: 20]
3(d) Identify and explain two advantages to this business of using just-in-time inventory 6
control.
Knowledge [2 × 1] – identification of relevant advantage [max 2]. Application marks may be
Application [2 × 1] – award 1 mark for each way if relevant reference made to this awarded for appropriate
business. use of the following: flow
Analysis [2 × 1] – award 1 mark for each relevant explanation. Relevant points might production, expansion,
include: use of numbers, reduce
• Less inventory held [k] so less chance of wastage [an] as drinks could go out of date expenses, drinks, small
[app] factory, ingredients.
• Lower costs [k] as don’t have to spend as much on insurance [an] which will help
reduce expenses [app]
• Less warehouse space [k] so have more space available [an] so have room to
introduce flow production process [app]
• Improve working capital [k] as less money tied up in inventory [an] which can help
improve gross profit [app]
• Improve cash flow [k]
• Increased motivation [k] as the idea came from one of the employees [app] and
therefore productivity could improve [an]
• Improved quality [k] as ingredients are fresher [app] so increase in sales [an].
3(e) Do you think this business should change to flow production? Justify your answer. 6
Knowledge [1] – award 1 mark for identification of relevant points about batch or flow Application marks may be
production. Positive or negative points allowed. awarded for appropriate
Application [1] – award 1 mark if relevant reference made to this business. use of the following: small
Analysis [2] – award up to 2 marks for relevant development of point(s). factory, soft drinks, just-in-
Evaluation [2] – justified decision made as to whether the business should change to flow time, 40 employees, use
production. Either viewpoint is acceptable. of numbers, batch.
Relevant points might include:
• Depends on level of demand/size of market [k] Note: Do not credit ‘work
• Economies of scale [k] 24/7’ as this could apply to
• Workers might become demotivated [k] as work is more repetitive than batch [app] so any mechanised process.
they become less productive [an]
• Cost of investment [k] as only a small business [app] do they have the necessary
finance [an]?
• Inflexible [k] as make a range of flavours [app] so might not be able to easily switch to
meet demand [an]
• Workers may fear redundancy [k] as machines replace them [an] so less than 40
employees needed [app].
[Total: 20]
4(d) Identify and explain two advantages that Nuwan’s business might have compared to 6
large retailers.
Knowledge [2 × 1] – award 1 mark for each relevant advantage identified [max 2]. Application marks may be
Application [2 × 1] – award 1 mark if relevant reference made to Nuwan's business. awarded for appropriate
Analysis [2 × 1] – award 1 mark for each relevant explanation. Reasons might include: use of the following:
• Better service [k] – all employees are trained [app] so able to maintain customer training, profit margins,
loyalty [an] sports goods such as
• Flexible [k] – able to react quickly to changes in customer requirements [an] if tennis and cricket,
customers want a different cricket product [app] specialist sports shop,
• Leaner management [k]. Nuwan only has his 3 employees to inform/ask [app] so able small, 3 employees, sole
to make decisions quicker [an] trader.
• More control [k] as he owns the business [app]
• Better communication [k]
• Specialised knowledge [k] as a sports shop [app] so will attract more customers [an].
4(e) Do you think that the best way for Nuwan to improve profit margins is to reduce 6
costs? Justify your answer.
Knowledge [1] – award 1 mark for identification of relevant knowledge [max 1]. Application marks may be
Application [1] – award 1 mark if relevant reference made to Nuwan’s business. awarded for appropriate
Analysis [2] – award up to 2 marks for relevant development of point. use of the following: wide
Evaluation [2] – justified decision made as to whether the best way to improve profit range, small business,
margins is to reduce costs. Relevant points might include: specialist shop, 3
• Lower costs could mean poorer quality goods [k] so customers might look elsewhere employees, good service,
for sports goods [app] training, sports goods
• Higher prices [k] could make them less competitive [an] so customers buy tennis such as tennis and cricket.
goods elsewhere [app] leading to fewer products sold [an] so overall profit margin
would rise but overall total profit might be lower [eval] Candidates can be
• Higher prices could help image of high quality [k] customers might be willing to pay awarded 3 marks max. [k,
more for specialist goods / good customer service [app] app, and an] for relevant
• Lower costs could mean a reduced wide range [app] of inventory [k]. explanations of profit,
rather than profit margin.
[Total: 20]
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (NH/SW) 115436/1
© UCLES 2016 [Turn over
2
Rosa and Eduardo are well qualified dentists. They set up DDC 10 years ago in country X. Rosa and
Eduardo invested $50 000 each from their own savings when they formed the business partnership.
Since then the business has expanded and it is now one of the largest dentist clinics in the country.
It employs 8 dentists, 10 assistants, 3 receptionists and a general manager for the clinic. However,
in future they will only require 2 receptionists as they are purchasing a new computer system for the
administration of the clinic. This computer system could be paid for by DDC taking out a bank loan.
DDC is in the private sector and only has patients (customers) who pay for their treatment. It has a
good reputation for high quality treatment and patients pay high prices. Patients are given up to three
months to pay for their treatment. There are also some dentist clinics in country X which are operated
by the Government and provide free treatment for poor families.
DDC’s premises are now too small. Each treatment room is very small and the dentists complain that
there is not enough space to work properly. Rosa and Eduardo are planning to move the clinic to larger
premises.
Advertisement
Appendix 1
The Government is increasing the number of dentist clinics which will offer free treatment for poor
families. Only people on low wages will be able to use these clinics. The Government hopes this will
reduce the number of days people are not at work because of problems with their teeth.
The increase in the number of dentist clinics paid for by the Government is increasing the job vacancies
for dentists and assistants. The Government is also improving hospital care for poor families. The
Government says all of these changes are helping to reduce unemployment.
Appendix 2
Time employed
Qualifications and experience Other interests
at DDC
Receptionist 1 10 years Receptionist qualifications Charity work
(age 50)
Receptionist 2 1 year No qualifications but lots of Plays football
(age 30) experience as a receptionist
for other dentists
Receptionist 3 4 years No qualifications and only Repairs computers at
(age 25) experience as a receptionist home
for DDC
Appendix 3
Cash flow forecast for DDC for the second half of 2016 ($000)
BLANK PAGE
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effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (NH) 115435/2
© UCLES 2016 [Turn over
2
1 (a) Identify and explain one advantage and one disadvantage to Rosa and Eduardo of forming a
business partnership.
Advantage: ................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage: ...........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) Consider an objective of each of the following three stakeholder groups of DDC. Do you think
there will be conflict between the objectives of each of these stakeholder groups? Justify your
answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
2 (a) Identify and explain two methods of training employees to use the new computer system.
Method 1: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) Consider the information about each of the three receptionists outlined in Appendix 2.
Recommend which receptionist should be made redundant. Justify your answer.
Receptionist 1: ..........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Receptionist 2: ..........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Receptionist 3: ..........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
3 (a) The Government is expanding the public sector provision of health care including dentist
clinics (see Appendix 1). Identify and explain two external benefits to the rest of society of this
increased provision of health care for poor families.
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
W: ......................................................................................................................................
X: .......................................................................................................................................
Y: .......................................................................................................................................
Z: ...................................................................................................................................[4]
(ii) Consider two ways the cash flow could be improved. Recommend the best way for Rosa
and Eduardo to improve the cash flow in the second half of 2016. Justify your answer.
Way 1: ................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Recommendation: .............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
.......................................................................................................................................[8]
4 (a) Identify and explain four factors Rosa and Eduardo should consider when choosing larger
premises.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Factor 3: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Factor 4: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[8]
(b) When DDC has moved to new premises, Rosa and Eduardo plan to use promotional methods
to attract more patients. Consider each of the following promotional methods. Recommend
which one you think they should choose. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
BLANK PAGE
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the May/June 2016 series for most Cambridge IGCSE®,
Cambridge International A and AS Level components and some Cambridge O Level components.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
1 (a) Identify and explain one advantage and one disadvantage to Rosa and Eduardo of
forming a business partnership. [8]
Award one mark for each relevant advantage/disadvantage (maximum of two), such as:
• Increased capital
• Additional partners to work in the business/help with decisions/holidays/responsibility
shared
• Additional specialisms/skills of partners
• More ideas.
• Unlimited liability
• No continuity
• Responsible for actions of other partners
• Disagreements may cause problems/arguments
• Slower decision making
• Profit will have to be shared.
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of the advantage/disadvantage.
Indicative response:
Increased capital to put into the business [k] because Rosa and Eduardo will each invest
$50 000 each [ap]. This will reduce the need to borrow money, saving interest payments, [an]
when the business expands and moves to larger premises [ap].
Possible application marks: qualified dentists; business set-up 10 years ago in country X;
$50 000 each partner; largest dentist clinics in the country; 1 general manager for the clinic;
bank loan to pay for new computer system; reputation for high quality treatments; private
patients; 3 months to pay for treatment; move to larger premises; offer teeth whitening; job
vacancies for dentists and assistants; information from Appendix 1 and 2.
There may be other examples in context which have not been included here.
(b) Consider an objective of each of the following three stakeholder groups of DDC. Do
you think there will be conflict between the objectives of each of these stakeholder
groups? Justify your answer. [12]
• Owner – invested own savings; make profit; expand to gain economies of scale; provide
a high quality service
• Patients – good treatment; affordable prices
• Employees – high wages; secure job; good working conditions.
Knowledge/Analysis/Evaluation
Level 1 One mark for each L1 statement (max of three marks) e.g. Employees want their
jobs to be secure.
Level 2 One L2 explanation can gain four marks and a further mark can be awarded for
each additional L2 explanation (max six marks) e.g. Employees will want their jobs
to be secure so they will keep receiving a wage for working in the dentist clinic. If the
business is successful then they are likely to keep their jobs but if not then they will
be made redundant and will receive no wage at all. (Four marks for L2 answer + one
application mark for answering in the context of the dental clinic.)
Level 3 For L3 to be awarded there needs to be at least two L2 marks awarded and then a
conclusion which justifies whether conflict between the different stakeholder groups
is likely to occur.
Possible application marks: qualified dentists; business set-up 10 years ago in country X;
$50 000 each partner; largest dentist clinics in the country; pay high prices; employs 8
dentists, 10 assistants, 3 receptionists, 1 general manager for the clinic; new computer
system requires fewer receptionists; reputation for high quality treatments; private patients; 3
months to pay for treatment; move to larger premises; offer teeth whitening; increasing
number of Government-owned dentist clinics; job vacancies for dentists and assistants;
information from Appendix 1 and 2.
There may be other examples in context which have not been included here.
2 (a) Identify and explain two methods of training employees to use the new computer
system. [8]
• On-the-job
• Off-the-job
• Examples could be used e.g. training course.
Award a maximum of three additional marks for each explanation or development – two of
which must be applied to this context – of the methods.
Indicative response:
Off-the-job training [k] because Rosa and Eduardo will want the receptionists to be trained to
a high standard in how to use the new computer system in the dental clinic [ap]. This will
mean they are trained by experts in using the new system and so they should be better
trained and be more efficient [an]. However, they will be away from the clinic and it may
mean that they cannot book-in patients to see the dentist and this might cause annoyance
with the patients leading them to go elsewhere to get their teeth treated [ap].
Possible application marks: qualified dentists; $50 000 each partner; largest dentist clinics in
the country; reception; receptionists; 1 general manager for the clinic; bank loan to pay for
new computer system; reputation for high quality treatments; private patients; move to larger
premises; job vacancies for dentists and assistants; information from Appendix 1 and 2.
There may be other examples in context which have not been included here.
(b) Consider the information about each of the three receptionists outlined in Appendix 2.
Recommend which receptionist should be made redundant. Justify your answer. [12]
Knowledge/Analysis/Evaluation
Level 1 One mark for each L1 statement (max of three marks) e.g. Receptionist 1 has
worked for DDC for a long time and will be used to their working practices.
Level 2 Four marks for the first L2 answer and then one extra mark for each additional L2
answer up to maximum of six marks. E.g. Receptionist 1 has worked for DDC for a
long time and will be used to their working practices which will mean that they will
know how the dental clinic works and the dentist will be able to delegate tasks to
them more easily. (Four marks for L2 answer + one application mark for answering
using reference to patients and dental clinics.)
Level 3 For L3 to be awarded there needs to be at least two L2 marks awarded and then a
recommendation which justifies which receptionist to make redundant.
3 (a) The Government is expanding the public sector provision of health care including
dentist clinics (see Appendix 1). Identify and explain two external benefits to the rest
of society of this increased provision of health care for poor families. [8]
Knowledge [2 × 1] award one mark for each relevant third party external benefit
Analysis [2 × 1] award one mark for a relevant explanation of third party external
benefit
Application [2 × 2] award two application marks for each external benefit
Award one mark for each relevant external benefit (maximum of two), such as:
Third party groups who are most likely to benefit from the increase in public sector dental
clinics:
Do not reward poor families or government free dental clinics as third party groups.
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of the benefits.
Indicative response:
Jobs will be created [k] because more dentists will need to be employed at the clinics [ap].
Government-owned dental clinics will lead to lower levels of unemployment and this will
increase spending for other businesses [an].This will also be true for receptionists as well as
practice managers and dental assistants who will also find it easier to get a job [ap].
Possible application marks: less illness; qualified dentists; private patients; Government-
owned dentist clinics; free treatment in Government dentist clinics for poor families;
increasing number of Government-owned dentist clinics; job vacancies for dentists and
assistants; country x.
There may be other examples in context which have not been included here.
W $ 560 000
X $1 000 000
Y $ 960 000
Z $ 160 000
(Format of the forecast boxes means that 000 or $ are not essential.)
(ii) Consider two ways the cash flow could be improved. Recommend the best way for
Rosa and Eduardo to improve the cash flow in the second half of 2016. Justify
your answer. [8]
Example to increase the cash inflows (1) – e.g. increase number of patients; increase
sales revenue; reduce time for payment by patients; bank loan would provide a cash
injection.
Example to reduce the cash outflows (1) – e.g. reduce overheads; obtain trade
credit/delay payment to creditors; reduce rent; reduce wages/lay-off workers.
The answer should not refer to profit or loss – the focus is purely cash flow.
Solutions should be realistic for a six-month period i.e. not long-term solutions.
Level 1 One mark for each statement e.g. Increase sales revenue (one mark).
Level 2 Four marks for the first L2 answer and then one extra mark for each additional
L2 answer up to a maximum of six marks.
E.g. The amount of cash flow at the end of each month after.
Level 3 For L3 to be awarded there needs to be at least two L2 marks awarded and
then a recommendation which justifies which is the best way to choose.
Knowledge/Analysis/Evaluation
Level 3 7–8 marks
Well justified recommendation as which is the best way to choose.
Level 2 4–6 marks
Detailed discussion of advantage/disadvantage of each suitable way
to improve the cash flow.
Level 1 1–3 marks
Outline of advantage/disadvantage of each suitable way to improve
the cash flow.
4 (a) Identify and explain four factors Rosa and Eduardo should consider when choosing
larger premises [8]
Award one mark for each relevant factor (maximum of four), such as:
Do not reward good access for suppliers and wage levels of workers in the area.
Award a maximum of one additional mark for each explanation – 2 of which must be applied
to this context – of the factor.
Indicative response:
Parking available for patients [ap] because if there is not sufficient parking available for
patients to use then they may prefer to go to alternative dental clinics for treatment and DDC
may lose these patients [an].
Possible application marks: largest dentist clinics in the country; employs 8 dentists, 10
assistants, 3 receptionists, 1 general manager for the clinic; reputation for high quality
treatments; private patients; Government-owned dentist clinics; job vacancies for dentists
and assistants; information from Appendix 1 and 2.
There may be other examples in context which have not been included here.
(b) When DDC has moved to new premises, Rosa and Eduardo plan to use promotional
methods to attract more patients. Consider each of the following promotional
methods. Recommend which one you think they should choose.
Justify your answer. [12]
Knowledge/Analysis/Evaluation
Level 3 At least 2 × Level 2 +
9–10 marks for well justified recommendation as to the best method
of promotion to use rather than the alternatives.
Level 1 One mark for each L1 statement (max of 3 marks) e.g. Advertising on a website is a
relatively cheap form of advertising.
Level 2 Four marks for the first L2 answer and then one extra mark for each additional L2
answer up to maximum of six marks. E.g. Advertising on a website is a relatively
cheap form of advertising but it may be expensive to set-up in the first place if Rosa
or Eduardo do not know how to do this. Also maintenance will be required to keep
the website up-to-date. The website can show examples of dental treatment which
shows white perfect teeth. This will encourage people to become patients at the
clinic so they can benefit from the treatments shown on the website. (Four marks for
L2 answer + 1 application mark for including reference to teeth whitening and dental
treatment.)
Level 3 For L3 to be awarded there needs to be at least two L2 marks awarded and then a
recommendation which justifies which is the best method to choose.
Possible application marks: qualified dentists; business set-up 10 years ago in country X;
largest dentist clinics in the country; employs 8 dentists; reputation for high quality
treatments; private patients; 3 months to pay for treatment; offer teeth whitening; increasing
number of Government-owned dentist clinics; information from Appendix 1 and 2.
There may be other examples in context which have not been included here.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
11_0450_11_2016_1.12
© UCLES 2016 [Turn over
2
1 C&C has a good reputation for making high quality, hand-made shoes. It has 120 full-time skilled
employees. C&C needs to recruit another 20 production employees to meet increased demand.
The Managing Director said: ‘I don't know why people worry about globalisation. Two years ago
we did not export, now exports are 10% of our output and increasing.’ C&C has orders for 100 000
pairs of shoes in 2017. The Managing Director cannot decide whether to introduce new technology
into the production process.
...........................................................................................................................................
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........................................................................................................................................... [2]
Threat 1:............................................................................................................................
...........................................................................................................................................
Threat 2:............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two suitable ways in which C&C might advertise the job vacancies.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two benefits to C&C of having full-time employees.
Benefit 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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...........................................................................................................................................
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Benefit 2:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think C&C should introduce new technology into the production process? Justify your
answer.
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2 Dowson is a large business which owns a number of shops. It sells a range of electrical goods such
as computers and televisions. The Finance Director has been looking at some recent financial data,
as shown in Table 1. He is pleased with Dowson's liquidity but knows he must reduce its high level
of debt including an overdraft of $6m. He said: 'The economy is in recession. Many small retailers
have failed. Size is an advantage!’
2015 2016
Revenue $280m $300m
Profit $175m $180m
Current ratio 1.2:1 1.5:1
Acid test ratio 0.8:1 0.5:1
Return on capital employed 10% 10%
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........................................................................................................................................... [2]
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(c) Identify and explain two ways in which the size of the business may benefit Dowson.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two problems for Dowson of having a high level of debt.
Problem 1:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Problem 2:.........................................................................................................................
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Explanation:.......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think the Finance Director is right to be pleased with the liquidity of the business?
Justify your answer using the ratio results in Table 1.
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3 YOGO is a new business which Amelia has just set up using Government support. YOGO makes
a range of sweets (candy) targeted at adults. It is a niche market. Amelia has been looking at the
marketing part of her business plan. She has to decide which pricing method to use. Amelia is
spending a lot of money on packaging. She did not do any primary market research as she thinks
she can use secondary data to make decisions. She believes that all adults like sweets.
(a) Identify two reasons why a Government might support business start-ups.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
Part 1:................................................................................................................................
...........................................................................................................................................
Part 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible pricing methods that Amelia might use.
Method 1: ..........................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Method 2:...........................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two reasons why packaging is important for YOGO’s products.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think Amelia’s business would benefit from primary market research? Justify your
answer.
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4 DCP makes a range of high quality industrial paints. It sells direct to 6 large business customers
which are located in different countries. DCP charges a price of $0.35 per litre. It operates in a
competitive market. The Operations manager has been looking at DCP's costs as shown in Table 2.
He wants to increase profit but he does not want to buy cheaper materials.
Function 1:.........................................................................................................................
...........................................................................................................................................
Function 2:.........................................................................................................................
........................................................................................................................................... [2]
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........................................................................................................................................... [2]
(c) Identify and explain two ways in which DCP might communicate with its customers.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two possible reasons why quality is important to DCP.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think that charging a higher price is the best way for DCP to increase profit? Justify
your answer.
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........................................................................................................................................... [6]
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effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2016 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some Cambridge O Level
components.
1(a) What is meant by ‘globalisation’? 2 Note: Do not accept answers that clearly
relate to a business / businesses
Clear understanding [2]: e.g. – the growth in worldwide trade [2]
Freer movement of people and capital between countries [2]
The process of countries becoming more interconnected [2]
1(b) Identify two possible threats to C&C from globalisation. 2 Note: Do not accept selling abroad
© UCLES 2016
Page 3 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
1(c) Identify and explain two suitable ways in which C&C might advertise the 4 Application: skilled, high quality,
job vacancies. demand, factory, shoes or associated
words as leather, sewing, global,
Knowledge [2 × 1] – award 1 mark for each relevant way production, good reputation
Application [2 × 1] – award 1 mark for each relevant explanation
Relevant points might include: Do not accept: ‘in the street’,
• Job centre [k] as local shoemakers would look here for jobs [app] internal / external, Internet or posters on its
• advertising in newspaper [k] as skilled it is labour [app] own.
• specialist (trade magazines) [k] as looking for people to hand make
shoes [app] Award relevant examples of either two
• recruitment agency [k] so C&C can focus on meeting the extra external or one example of each
demand [app]
• jobs website / own website / social media [k]
• internal newsletter [k]
• Radio / television [k]
• Word of mouth [k]
1(d) Identify and explain two benefits to C&C of having full-time employees. 6 Application: skilled, high quality, demand,
factory, shoes or associated words such
Knowledge [2 × 1] – award 1 mark for each advantage identified as leather, sewing, global, 120 (workers)
Application [2 × 1] – award 1 mark if relevant reference made to C&C 100 000 (shoes), 20 production
Analysis [2 × 1] – award 1 mark for each relevant explanation employees)
Relevant points might include:
• Easy to communicate / update [k] on new styles [app] as employees Note: must link advantage to C&C to be
always there [an] rewarded. E.g. ‘Feel more secure’ alone is
• Motivated / More committed to the business [k] so likely to produce too vague as this is about the employee
enough shoes [an] to help meet the growing demand [app] and not the business.
• Fewer workers needed [k] therefore less administration needed [an]
• No need to train regularly [k] as these are skilled workers [app] so Do not accept: fast / quicker production,
able to maintain quality / output [an] higher output / quality, increased efficiency
or work harder as K points. Candidate
• internal pool of candidates for promotion [k] which can help keep
must explain ‘why’ these occur.
recruitment costs low [an]
© UCLES 2016
Page 4 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
1(e) Do you think C&C should introduce new technology into the production 6 Application: 20 production employees,
process? Justify your answer. 120 staff, 100 000 pairs of shoes, exports
10% of output, skilled, high quality,
Knowledge [1] – award 1 mark for identification of relevant issue(s). Positive demand, factory, shoes or associated
or negative points allowed [max 1] words such as leather, sewing.
Application [1] – award 1 mark if relevant reference made to C&C’s business
Analysis [2] – award up to 2 marks for relevant development of point(s) Note: points can relate to employees or
Evaluation [2] – justified decision made as to whether C&C should introduce the business
technology into the production process
Relevant points might include: Accept: ‘Faster / quicker / saves time,’ as
• Increased production [k] as need to produce 100 000 each year [app] correct knowledge, given that current
so able to work all the time [an] production is hand-made.
• Consistent quality [k] as machinery likely to make fewer errors [an]
which can help retain / enhance reputation [app] For evaluation either viewpoint is
• Risk to reputation [k] as known for its hand-made shoes [app] so acceptable.
fewer people may demand its products [an]
• Impact on employee motivation [k] as work could become less
interesting [an] so quality of shoes falls [app]
• Risk of job insecurity [k] as it replaces some / all the skilled workers
[app] which could lower efficiency [an]
• Cost of investment / retraining [k]
© UCLES 2016
Page 5 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
2(a) What is meant by ‘Return on capital employed’? 2 Note: Must show the awareness of the
relationship between profit and capital
Clear understanding [2]: ROCE means the profit of the business expressed employed for 2 marks
as % of capital invested in the business or correct formula.
(Profit / Capital employed × 100)
Some understanding [1] – e.g. profit from capital invested or money made on
investment
2(c) Identify and explain two ways in which the size of the business may 4
benefit Dowson. Application: recession, overdraft $6 m,
large / big, electrical goods, shops, larger
Knowledge [2 × 1] – award 1 mark for each relevant advantage range of goods. Use of figures from table
Application [2 × 1] – award 1 mark for each relevant explanation in context of 1.
Dowson
Relevant points might include: Accept: Economies of scale [K] if no
• Able to attract better employees [k] so have the expertise to survive specific examples given.
the recession [app]
• Access to finance [k] as seen as lower risk of failing [app]
• Discounts for bulk buying [k] so able to charge lower prices for
electrical goods [app]
• Marketing economies or bigger marketing budget [k] as able to justify
national advertising [app]
• Spread risk [k] as can afford to stock a wide range of products [app]
• Able to dominate the market / large market share [k] so difficult for
small retailers to compete [app]
© UCLES 2016
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Cambridge IGCSE – October/November 2016 0450 11
2(d) Identify and explain two problems for Dowson of having a high level of 6 Application: recession, overdraft $6m,
debt. large / big, electrical goods, shops,
liquidity, use of numbers from table 1.
Knowledge [2 × 1] – award 1 mark for each advantage identified
Application [2 × 1] – award 1 mark if relevant reference made to Dowson Note: Do not accept bankruptcy / closure
Analysis [2 × 1] – award 1 mark for each relevant explanation of business as knowledge
Relevant points might include:
• High financial risk [k] so banks / suppliers might be reluctant to lend
to them [an] so not able to stock a wide range of electrical products
[app]
• Higher expenses [k] which will reduce level of profit [an]
• Problems if interest rates rise [k] as might not be able to meet
repayments [an] increasing risk Dowson also fails [app]
• Difficult to raise additional finance [k] if lenders fear Dowson not able
to repay further loans [an]
• Cash flow implications / liquidity [k] as acid test ratio is only 0.5: [app]
could lead to insolvency [an]
© UCLES 2016
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Cambridge IGCSE – October/November 2016 0450 11
2(e) Do you think the Finance Director is right to be pleased with the 6 Application: marks may be awarded for
liquidity of the business? Justify your answer using the ratio results in appropriate use of the following: current
Table 1. ratio 1.2:1, 1.5:1, or change by 0.3, acid
test ratio 0.8:1, 0.5:1, Acid test fallen by
Knowledge [1] – award 1 mark for identification of relevant points 37.5%, Current ratio increased by 25%,
Application [1] – award 1 mark if relevant reference made to Dowson’s stockholding has risen, recession,
business overdraft $6m, large / big, electrical goods
Analysis [2] – award up to 2 marks for relevant development of point(s)
Evaluation [2] – justified decision made as to whether the Finance Director is
right to be pleased about liquidity
Relevant points might include:
• Current ratio increased [k] by 0.3 [app][an] so more liquid [an]
• Acid test lower [k] from 0.8 to 0.5 [app] so not able to pay short-term
debts [an] possibly due to high value of its inventory [an]
• Expenses are high [k] as have a high level of debts, which includes
$6 m overdraft [app]
• Risk that demand might fall [k] due to recession [app] therefore he
would be left with excess stock [an]
• High level of inventory [k] 66% of current assets [app] [ an]
• High level of trade receivables [k] danger that customers might not
pay [an] due to recession [app] so business will lack the cash it
needs [an]
• Current ratio shows the business is able to pay its short-term debts
[k]
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Cambridge IGCSE – October/November 2016 0450 11
3(a) Identify two reasons why a government might support business start- 2 Note: Do not allow ‘improving the
ups. economy’ or ‘to receive tax’ or ‘increasing
the economy’.
Knowledge [2 ×1] award one mark per reason
Points might include: reduce unemployment, increase competition, increase
output, benefit society, small businesses can grow
3(b) Identify two parts (other than marketing) of a business plan. 2 Note: Accept any piece of information that
would be included in a business plan that
Knowledge [2 ×1] award one mark per part is NOT marketing.
Points might include: cash flow forecast, location, human resources plan,
production details, business aims
3(c) Identify and explain two possible pricing methods that Amelia might 4 Application: sweets / candy, new
use. business, business plan, money spent on
packaging, secondary data, people like
Knowledge [2] – award 1 mark for each role identified sweets, niche market, adult.
Application [2] – award 1 mark for each relevant reference to this business
Relevant points might include:
• penetration pricing [k] as need to get people to try her sweets [app]
• price skimming [k] as it’s a niche market [app]
• cost plus pricing [k] as likely to have large set up costs [app]
• promotional pricing [k]
• competitive pricing [k]
• psychological pricing [k]
© UCLES 2016
Page 9 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
3(d) Identify and explain two reasons why packaging is important for 6 Application:
YOGO’s products. Sweets / candy, new business, business
plan, secondary data, people like sweets,
Knowledge [2 × 1] – award 1 mark for each relevant role niche market, adult, food product. taste
Application [2 × 1] – award 1 mark if relevant reference made to this business
Analysis [2 × 1] – award 1 mark for each relevant explanation
Relevant points might include:
• List ingredients [k] as it’s a food product [app] must state what it
contains to avoid legal action [an]
• Promotion / to attract customers [k] to buy[an] from the new business
[app]
• Inform [k] customers about its flavours [app] so people know what is
in its products [an]
• Protection / keep item fresh [k] so the sweets are not damaged [app]
otherwise products might be wasted [an]
• Boost brand image / impression of high quality [k] as it is a niche
market [app] which can help increase sales / revenue [an]
• Easier to store / transport [k]
© UCLES 2016
Page 10 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
3(e) Do you think Amelia’s business would benefit from primary market 6 Application:
research? Justify your answer. sweets / candy, new business, business
plan, secondary data, people like sweets,
Knowledge [1] – award 1 mark for identification of relevant point(s) niche market, adult, food product, money
Application [1] – award 1 mark if relevant reference made to Amelia’s spent on packaging
business
Analysis [2] – award up to 2 marks for relevant development of point (s) Note: Do not reward identification of
Evaluation [2] – justified decision made as to whether Amelia would have methods of primary research alone as the
benefited from carrying out primary market research question is asking for the benefits
Relevant points might include:
• It is expensive [k] spends a lot on packaging [app] therefore may not For evaluation either viewpoint is
be able to afford it [an] acceptable
• It is time consuming [k] she has already done secondary research
[app] so how much more can she find out [an]
• Collect precise information[k] on sweets [app] so that she can
produce the most appropriate products[an]
• Secondary data may be outdated [k] [app]Needs might have
changed [an]
• Help better target promotion / in pricing decisions [k] especially as
new business [app]
© UCLES 2016
Page 11 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
4(c) Identify and explain two ways in which DCP might communicate with its 4 Application: paint or use of associated
customers. words such as walls, litres, colour, 6 large,
business customers, competitive market,
Knowledge [2 × 1] – award 1 mark for each relevant reason high quality, different countries, operations
Application [2 × 1] – award 1 mark for each relevant explanation manager
Relevant points might include:
• Email / website / social networks [k] as customers are in different Methods identified must be appropriate for
countries [app] a large business customer
• Meetings [k] as only have 6 customers [app]
• Phone / text [k] as able to quickly check information about paint Do not accept:
orders [app] internal communication e.g. memos,
• Letter [k] noticeboard, categories such as written or
• faxes [k] verbal on their own, primary methods of
research
© UCLES 2016
Page 12 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
4(d) Identify and explain two possible reasons why quality is important to 6 Application: paint, litres, colour, 6
DCP. business customers, competitive market,
high quality, industrial, different countries,
Knowledge [2 × 1] – award 1 mark for each reason use of numbers
Application [2 × 1] – award 1 mark if relevant reference made to DCP
Analysis [2 × 1] – award 1 mark for each relevant explanation Candidates may consider why reducing
Relevant points might include: quality is a problem
• Good reputation / brand image [k] so customers trust the paint [app]
which could help increase sales [an]
• Attract new customers [k] as products might be better than rivals
[app]
• Meet legal controls [k] as contains chemicals [app] must be safe to
avoid being prosecuted / sued [an]
• More competitive [k] as paint is very similar [app] this could give
them a competitive advantage over its rivals [an]
• Create brand / customer loyalty [k] so business [app] customers
keep returning [an]
• Can charge a higher price [k] than 35 c per litre [app] to increase
revenue [an]
• sales might fall [k] if quality is lowered [an] because it is a
competitive market [app]
© UCLES 2016
Page 13 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11
4(e) Do you think charging a higher price is the best way for DCP to increase 6 Application: paint or use of associated
profit? Justify your answer. words such as walls, litres, colour,
cheaper materials, 6 business customers,
Knowledge [1] – award 1 mark for identification of relevant points competitive market, high quality, industrial,
Application [1] – award 1 mark if relevant reference made to DCP’s business different countries, use of numbers
Analysis [2] – award up to 2 marks for relevant development of point
Evaluation [2] – justified decision made as to whether charging a higher price Note: The answer should focus on price or
is the best way to increase profits cost changes
Relevant points might include:
• Revenue could increase[k] and if quantity and costs of the paint
[app] remain the same profit could increase [an] Note: Do not award candidates who only
• Demand may fall [k] as customers might choose rival products [an] in discuss alternative ways to increase profit,
this competitive market [app] for example, advertising.
• if demand is price inelastic [k] higher price will see a lower fall in
demand [an] therefore revenue will rise [an] For evaluation either viewpoint is
• business may be able to lower costs [k] therefore increasing profit acceptable
with current prices [an]
• It would reinforce the image [k] of high quality [app] customers might
be happy to pay it [an]
• depends on actions of competitors [k]
© UCLES 2016
Cambridge International Examinations
Cambridge International General Certificate of Secondary Education
* 5 4 6 1 7 7 9 3 0 5 *
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
DC (KN/SG) 125828/2
© UCLES 2016 [Turn over
2
1 (a) P & P needs to be efficient. Identify and explain four methods P & P could use to motivate
production workers.
Method 1: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Method 3: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
Method 4: ..................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[8]
(b) P & P has developed a new type of paint. Consider the following three factors that will affect
the channel of distribution the company will use. Which factor will be the most important when
deciding the best channel of distribution? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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Conclusion: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
2 (a) Identify and explain two reasons why P & P might respond to the pressure group and change
what the company is doing.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) P & P production results in external costs as outlined in Appendix 3. Consider the external
costs and external benefits of the production of paint by P & P. Recommend whether the
Government should take any action. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
3 (a) P & P has decided to use batch production to produce the new paint. Identify and explain two
factors which may have influenced this decision.
Factor 1: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Factor 2: ....................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) Consider the two options outlined in Appendix 2 for increasing the output of paint. Recommend
which option the directors should choose. Use the cost data in Appendix 2 to help justify your
answer.
Option A: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Option B: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
4 (a) Identify and explain two reasons why added value is important to P & P.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[8]
(b) P & P is planning to start selling its products in other countries by 2018. Consider each of the
three following changes the company could make. Which one of these changes will be most
helpful in selling products to other countries? Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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Conclusion: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................[12]
BLANK PAGE
BLANK PAGE
BLANK PAGE
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effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
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To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge will not enter into discussions about these mark schemes.
Cambridge is publishing the mark schemes for the October/November 2016 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some Cambridge O Level
components.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
1 (a) P & P needs to be efficient. Identify and explain four methods P & P could use to
motivate production workers. [8]
Application [4 × 1] – award one mark for each relevant method for production workers
Analysis [4 × 1] – award one mark for explanation of how each method increases motivation
Award one mark for each relevant method (maximum of four), such as:
• increase wages
• training
• profit sharing
• praise
• piece rate
• employee of the month
• bonus
• change in leadership style
• fringe benefits
• better working conditions
• job rotation
• job enlargement
• setting targets
• promotion
Indicative response:
Introduce piece-rate [ap] because if the production workers produce more paint they will be
paid more and so they will be motivated to work harder [an].
© UCLES 2016
Page 3 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
(b) P & P has developed a new type of paint. Consider the following three factors that will
affect the channel of distribution the company will use. Which factor will be the most
important when deciding the best channel of distribution? Justify you answer. [12]
Where customers are • do they deliver paint or do customers purchase from the shops
located • are they close to the factory – may use direct selling – lower
transport costs
• may require selling agents is exporting
How often the product • purchased regularly – may need to be sold in shops near to
is purchased customers/less often then customers may be willing to travel to
large shops to purchase paint
• may use wholesaler/middleman if bought less frequently
Where competitors • may need to sell paint in same retail outlets to competitors –
sell their products outlet already attracts many customers
• don’t sell at the same outlets as competitors – may need to
reduces price/sales
Knowledge/Analysis/ Evaluation
7–8 marks for some limited judgement shown in conclusion as to which factor
will be the most important when choosing a channel of distribution.
Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Where do competitors sell their
paint.
© UCLES 2016
Page 4 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
Level 2 – one L2 explanation can gain 4 marks and a further mark can be awarded for each
additional L2 explanation (max 6 marks) e.g. Where do competitors sell their paint. They may
want to sell paint in large shops where many brands of paint are sold so that when
customers are looking for paint they will see their brand of paint as well and be more likely to
buy it than if they sell the paint in shops where no other paint is sold. 4 marks for L2 answer).
Level 3 – For L3 to be awarded there need to be at least two L2 marks awarded and then a
recommendation which justifies which factor is the most important when selecting the
channel of distribution to use.
Possible application marks: paint manufacturer; factory; large limited company; imports raw
materials; capital city; country X; sells to large retailers; uses batch production; new
waterproof paint; target market professional painters; new paint for outside of houses; start
exporting paint in 2018.
There may be other examples in context which have not been included here.
© UCLES 2016
Page 5 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
2 (a) Identify and explain two reasons why P & P might respond to the pressure group and
change what the company is doing. [8]
Award one mark for each reason (maximum of two), such as:
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of why the business might respond to the pressure group and
change what the company is doing.
Indicative response:
To not lose customers who may buy from competitors if they are against businesses polluting
the environment (k). The pollution affects a lot of people such as fishermen (ap) and may
mean there are a greater number of people lobbying the government for the company to
reduce pollution put into the river (ap). The more people affected then the more effective the
pressure group and the more likely they are to change to another company if P & P do not
change the way they produce paint (an).
There may be other examples in context which have not been included here.
© UCLES 2016
Page 6 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
(b) P & P production results in external costs as outlined in Appendix 3. Consider the
external costs and external benefits of the production of paint by P & P. Recommend
whether the Government should take any action. Justify your answer. (12)
External costs Pollution – waste put into river makes children ill, kills fish,
people can no longer catch their own fish, have to buy fish
now – no clean water
External benefits Provides jobs; increased sales for fish sellers; taxes paid to
government
Knowledge/Analysis/ Evaluation
Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. The company puts waste
products into the river,
Level 2 – one L2 explanation can gain 4 marks and a further mark can be awarded for each
additional L2 explanation (max 6 marks) e.g. The company puts waste products into the river
and this kills the fish leading to local people have to increase their spending on food which
leaves them less to spend on other products. (4 marks for L2 answer plus one application
mark for mentioning catching fish from the river).
Level 3 – For L3 to be awarded there need to be at least two L2 marks awarded and then a
recommendation whether the government should introduce regulations on the activities of
this company.
© UCLES 2016
Page 7 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
Possible application marks: paint manufacturer; large limited company; imports raw
materials; large factory next to a river; makes tins (cans) of paint; pressure groups; sells
to large retailers; uses batch production; 150 production workers; employees live near to
the factory; details of two options outlined in Appendix 2; details of pollution caused by
paint production outlined in Appendix 3. No credit for paint but ok for pollution.
There may be other examples in context which have not been included here.
3 (a) P & P has decided to use batch production to produce the new paint. Identify and
explain two factors which may have influenced this decision. (8)
Award one mark for each relevant factor (maximum of two), such as:
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of the factor which may have influenced the decision to use batch
production.
Indicative response:
Size of the output [k] as if a large output is not required then flow production will not be used
as too many products will be produced (an). Paint has many colours and types and so only a
certain quantity of one type will be needed (ap). P & P will produce a certain amount of, for
example bathroom paint and then a certain amount of kitchen paint because the demand will
not be high for all types of paint (ap).
Possible application marks: different colours of paint; paint manufacturer; paint tins; large
limited company; sells to large retailers; 150 production workers; employees live near to
the factory; paid using time-rate and no fringe benefits; new waterproof paint; new
machinery/equipment to make the paint; details of two options outlined in Appendix 2.
There may be other examples in context which have not been included here.
© UCLES 2016
Page 8 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
(b) Consider the two options outlined in Appendix 2 for increasing the output of paint.
Recommend which option the directors should choose. Use the cost data in Appendix
2 to help justify your answer. (12)
Option A – $150 000 × 10% = cost of $15 000 interest per year.
Option B – $75 000 × 10% = cost of $7 500 interest / yr plus $10 000 = $17 500 / year.
Option A land cost + factory + machinery = $150 000 (L1)
Option B land cost + lease = $85 000 (L1)
Option B will be $72 500 cheaper in the first year (L2)
Option A Option B
Total cost in the first year $165 000 (L2) $92 500 (L2)
Knowledge/Analysis/ Evaluation
Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Option A is more expensive
than Option B
© UCLES 2016
Page 9 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each
additional L2 explanation (Max 6 marks). Option A is more expensive than Option B but
when calculating the costs per tin then Option A is cheaper at $0.83 per tin compared to
Option B of $0.90 per tin. (5 marks)
Level 3 – For L3 to be awarded there need to be at least two L2 marks awarded and then a
recommendation which justifies which is the best option to choose.
Possible application marks: paint manufacturer; large limited company; imports raw
materials; large factory next to a river; uses batch production; 150 production workers; start
exporting paint in 2018; details of option 1 – 200 000 tins of paint, $100 000 land cost,
$50 000 factory and machinery, interest rate of 10% ; details of option 2 – 102 500 tins of
paint, $75 000 extension cost, $10 000 lease, interest rate of 10%
There may be other examples in context which have not been included here.
4 (a) Identify and explain two reasons why added value is important to P & P. (8)
Award one mark for each reason (maximum of two), such as:
Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of the reason why added value is important.
Indicative response:
Allows costs to be paid (k) as wages and other factory costs are paid out of the revenue from
sales of paint (ap) and the price of paint is higher than the total costs of producing it (ap).
This means that P & P will make a profit (an).
Possible application marks: paint manufacturer; large limited company; imports raw
materials; makes tins (cans) of paint; sells to large retailers; uses batch production; 150
production workers; new waterproof paint; target market professional painters; new paint for
outside of houses; start exporting paint in 2018; increase in imports of paint.
There may be other examples in context which have not been included here.
© UCLES 2016
Page 10 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
(b) P & P is planning to start selling its products in other countries by 2018. Consider
each of the three following changes the company could make. Which one of these
changes will be most helpful in selling products to other countries? Justify your
answer. (12)
Advantages Disadvantages
Take over a retail Will own many outlets to Expensive to buy shares
business in one of the sell their paint in the other business
other countries
Change to a public limited So they can sell shares to Accounts are public and
company to raise the public may be able to be taken
additional capital Pay additional costs of over
exporting/expanding
Form joint ventures in the Local knowledge of the Have to share information
other countries overseas market. and profit.
Knowledge/Analysis/ Evaluation
Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Remaining a private limited
company means the business will keep its accounts private.
Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each
additional L2 explanation (max 6 marks) e.g. Changing to a public limited company means
the business will not keep its accounts private and so it will be easier for competitors to
obtain information about the company. However, it will be able to obtain capital from selling
shares as it can now sell shares to more than family and friends and this will enable it to
cover the increase in costs from starting to export. (4 marks for L2 answer).
© UCLES 2016
Page 11 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21
Level 3 – for L3 to be awarded there need to be at least two L2 marks awarded and then a
justified conclusion as to which change will be most helpful when selling products abroad.
Possible application marks: paint; country X; paint manufacturer; large limited company;
imports raw materials; makes tins (cans) of paint; sells to large retailers; new waterproof
paint; new paint for outside of houses; start exporting paint in 2018; wants to increase
output; increase in imports of paint.
There may be other examples in context which have not been included here.
© UCLES 2016
Cambridge International Examinations
Cambridge International General Certificate of Secondary Education
*6225071318*
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
11_0450_11_2018_1.12
© UCLES 2018 [Turn over
2
1 SOLS makes 5 styles of luxury shoes for men, using job production. SOLS operates in a niche
market. Quality assurance is important. All materials, including leather, are imported. SOLS uses
cost plus pricing. The shoes are sold directly to customers through its website. The Managing
Director said: ‘We can sell our shoes for $100 less a pair than our competitors because we have
no shops.’ Demand is increasing and the Managing Director has to decide whether to change to
batch production.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two advantages to SOLS (other than lower prices) of using a website to sell its products.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Explain, with reference to SOLS, the difference between quality assurance and quality control.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [4]
(d) Identify and explain one advantage and one disadvantage to SOLS of using cost plus pricing.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think SOLS should change its method of production? Justify your answer.
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...........................................................................................................................................
........................................................................................................................................... [6]
2 AllPlay is a toyshop, set up by Vince in 2012. Each year Vince has met his business objectives
including making a profit in 2017. AllPlay imports all of its products. Vince wants to expand by
opening a second shop so he can sell a wider range of products. The cost of buying the shop is
$20 000. One option for finance is a bank loan. Vince’s bank manager will want to see AllPlay’s
Income statement, and other financial documents.
Table 1: Extract from AllPlay’s Income Statement for the year ending 30 September 2018
$ 000s
Revenue X
Gross profit 52
Profit 12
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage to AllPlay of importing its products.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two ways in which the bank might use AllPlay’s financial documents.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think a bank loan is the best source of finance for Vince to choose? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
3 Filltum is the brand name for a chain of vegetarian restaurants. It has 28 restaurants, 16 of which
are operated by franchisees. The Managing Director is pleased with its fast rate of growth at a time
when many businesses are failing. She said: ‘Having a well-motivated workforce is important to
our success. All new employees are given on-the-job training.’ Filltum plans to have 10 more
restaurants in the next year. The Managing Director has to decide whether to sell additional
franchises or open its own restaurants.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which having a well-motivated workforce can help Filltum
achieve success.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to Filltum of using on-the-job training.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think selling more franchises is the best way for Filltum to expand? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
4 AHP is a multinational company. It makes mobile (cell) phones in Europe in country X. 80% of its
sales are in Europe. Some people are concerned about AHP’s impact on the environment. The
Operations Director said: ‘AHP always tries to ensure it meets all legal controls. Globalisation has
created many opportunities for AHP and its stakeholders. The Operations Director is planning to
relocate its factories to a low-cost country in Asia. Raw materials would need to be transported an
extra 4000kms. Interest rates are likely to increase across Europe.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which AHP might have an impact on the environment.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two ways in which an increase in interest rates might affect AHP.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think AHP should relocate its factories to a low-cost country in Asia? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
BLANK PAGE
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the October/November 2018 series for most
Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level
components.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will also comply with these
marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the
scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may
be limited according to the quality of the candidate responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.
1(a) What is meant by ‘niche market’? 2 For 2 marks must have both elements
Clear understanding [2] – e.g. highly specialised [1] sub part of a large
market [1]
Some understanding [1] – e.g. small part of a market OR specialist market
OR part of the market with specific needs and characteristics
1(b) Identify two advantages to SOLS (other than lower prices) of using a 2 The advantage must relate specifically to
website to sell its products. the business (SOLS) not to the customer.
1(c) Explain, with reference to SOLS, the difference between quality 4 Application marks may be awarded for
assurance and quality control. appropriate use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant method [max 2] • shoes or related words such as leather
Application [2 × 1] – award 1 mark for each explanation in context OR pairs OR luxury
• 5 styles
Relevant points might include: • sold directly to customers OR website
OR no shops
• Quality assurance involves checking throughout the process [k] such as • $100 less (per pair)
making sure leather used is suitable [app] • niche market
• Quality control happens at end [k] after shoes have been made [app] • job production
• Quality assurance means everyone is involved in checking [k] such as • batch production
each worker producing different styles [app] • men
• Quality assurance is process orientated [k] whereas quality control is
product orientated [k]
1(d) Identify and explain one advantage and one disadvantage to SOLS of 6 Application marks may be awarded for
using cost plus pricing.. appropriate use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant advantage / • shoes or related words such as pairs
disadvantage OR leather OR luxury
Application [2 × 1] – award 1 mark for each relevant reference made to this • 5 styles
business • sold directly to customers OR website
Analysis [2 × 1] – award 1 mark for each relevant explanation OR no shops
Relevant points might include: • $100 less (per pair)
• quality assurance
Advantage: • job production
• Know that the costs will be covered [k] and they can make a profit per • batch production
item [an] even though they can sell items for less than competitors [app] • niche market
• Simple / easy to calculate [k] so saves time when setting prices [an] for • competitors / competitive market
shoes [app]
• Know their profit margin / profit per item [k] Profit can only be credited if it is clear that
• Different mark ups could be added [k] for the 5 styles [app] this is profit per item / margin.
Disadvantage: Do not reward alone as [k] prices are too
• Does not consider what competitors do [k] so price set might be high, as this is not specific to cost-plus
uncompetitive [an] for each style [app] pricing.
• Does not take account of changes in demand OR spending patterns [k]
so could lead to fewer sales being made [an]
• Little incentive to control costs [k]
• Prices could be higher than competitors [k]
1(e) Do you think SOLS should change its method of production? Justify 6 Application marks maybe awarded for
your answer. appropriate use of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) [max 1] • Shoes or related words such as pair or
Application [1] – award 1 mark for a relevant reference made to this leather or luxury
business • 5 styles
Analysis [2] – award up to 2 marks for relevant development of point(s) • Sold directly to customers/ website/no
Evaluation [2] – justified decision made as to whether SOLS should change its shops
method of production • $100 less per pair
• Job or batch production
Relevant points might include: • Niche market
Job production:
• Meet exact customer demands / unique / higher quality [k] so able to
charge higher price [an] in a niche market [app]
• More varied work leads to higher motivation [k] leading to few workers
leaving / less absenteeism [an]
• Change could damage reputation [k] for its luxury product [app] which
could lower its sales [an]
Batch production:
• Flexible or easy to switch production [k] between the 5 styles [app] so
able to react quickly to changes in customer demand [an]
• Some economies of scale [k] leading to lower average costs [an]
• Can be demotivating for employees (as work likely to be more repetitive)
[k] so may not pay as much attention to quality assurance [app]
increasing amount or cost of wastage [an]
• Able to produce more [k] which is important as demand has increased
[app] so maybe able to meet additional demand [an]
• Cost of new equipment OR training [k]
2(a) What is meant by ‘business objectives’? 2 Do not award examples as this does not
explain the term
Clear understanding [2] e.g. a statement of a specific target that a business
works towards
2(c) Identify and explain one advantage and one disadvantage to AllPlay of 4 Application marks may be awarded for
importing its products. appropriate use of the following:
• toys or related words
Knowledge [2 × 1] – award 1 mark for a relevant advantage and disadvantage • correct use of data from table 1
Application [2 × 1] – award 1 mark for each explanation in context • widen his product range
Relevant points might include: • shop
• all inventory imported
Advantages: • met his objectives
• Access to a wider range of products [k] which he needs for the new shop • expand
[app]
• Lower priced products [k] so might be able to increase his revenue [app]
Disadvantages:
• Import quotas [k] reducing the number of toys [app]
• Exchange rate movements [k] might mean cost of sales rises above
$63 000 [app]
• Tariffs / Import Tax [k] increasing the costs of sales [app]
• Different legal OR quality standards [k]
• Can’t be sure of quality [k]
• Transport may take longer [k]
2(d) Identify and explain two ways in which the bank might use AllPlay’s 6 Application marks may be awarded for
financial documents. appropriate use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant way • toys or related words,
Application [2 × 1] – award 1 mark for each relevant reference made to this • correct use of data from table 1
business • $20 000
Analysis [2 × 1] – award 1 mark for each relevant explanation • widen his product range
• shop
Relevant points might include: • all inventory imported
• met his objectives
• To decide whether to give the loan [k] of $20 000 [app] because they • made profit in 2017 and 2018
can see if they can repay it [an] • income statement
• To identify assets for security [k] such as the existing shop [app] to • loan
reduce the risk of non-payment [an]
• Calculate liquidity / cash flow [k] so they know the business can pay its
short-term debts [an] of $63 000 [app]
• To offer advice [k] on whether a bank loan [app] is the best source of
finance [an]
• To compare financial documents over time [k] such as their income
statement [app] to help them to improve [an]
2(e) Do you think a bank loan is the best source of finance for Vince to 6 Application marks may be awarded for
choose? Justify your answer. appropriate use of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) • toys or related words
Application [1] – award 1 mark for a relevant reference made to this • correct use of data from table 1
business • $20 000
Analysis [2] – award up to 2 marks for relevant development of point(s) • widen his product range
Evaluation [2] – justified decision made as to whether a bank loan is the best • shop
source of capital for Vince. Either viewpoint is acceptable. • all inventory imported
• met his objectives
Relevant points might include:
• made profit in 2017 and 2018
• income statement
Loan:
• Can repay over a long period [k]
Loan cannot be awarded as application as
• Interest payable [k] on the $20 000 [app] so will add to costs [an]
this is in the question
• Time to convince bank [k] as need to produce financial documents [app]
3(c) Identify and explain two ways in which having a well-motivated 4 Application marks may be awarded for
workforce can help Filltum achieve success. appropriate use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant way [max 2] • restaurant or related words such as
Application [2 × 1] – award 1 mark for each explanation in context vegetables, menu, chef
• 10, 28, 16
Relevant points might include: • 12 of their own restaurants
• expansion plans
• Workers are willing to offer good service [k] in the restaurant [app] • franchise
• Workers willing to share ideas [k] to help the expansion plans [app] • on the job training
• Less likely to leave [k] the franchise [app] • brand name
• Less absenteeism [k] of chefs [app]
• Improved reputation [k] in the 28 locations [app]
• Increase productivity / efficiency / fewer errors [k]
3(d) Identify and explain two advantages to Filltum of using on-the-job 6 Application marks may be awarded for
training. appropriate use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant advantage [max 2] • restaurant or related words such as
Application [2 × 1] – award 1 mark for each relevant reference made to this vegetables, menu, chef
business • 10, 28, 16
Analysis [2 × 1] – award 1 mark for each relevant explanation • 12 of their own restaurants
• expansion plans
Relevant points might include: • franchise
3(e) Do you think selling more franchises is the best way for Filltum to 6 Application marks may be awarded for
expand? Justify your answer. appropriate use of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) [max 1] • restaurant or related words such as
Application [1] – award 1 mark for a relevant reference made to this vegetables, menu, chef
business • 10, 28, 16
Analysis [2] – award up to 2 marks for relevant development of point(s) • 12 of their own restaurants
Evaluation [2] – justified decision made as to whether selling more • expansion plans
franchises in the best way for Filltum to expand • fast rate of growth
• brand name
Relevant points might include: • when many businesses are failing
Franchises:
• Do not need to raise as much capital to expand [k] as franchisee will pay
a fee to buy the franchise [an]
• Will receive a share of each franchise’s profits [k] providing an extra
source of revenue [an]
• Faster way to expand [k] so able to maintain its fast rate of growth [app]
• Mistakes by one franchisee may create a bad image for whole business
[k] damaging reputation [an] and reducing sales revenue [an]
• Will be expected to offer support and advice [k] to these and other 16
franchises [app] which can increase costs [an]
• Can share risks with franchisee [k] when many businesses are
failing [app]
• Brand / Customer awareness increases [k]
Expand themselves:
• Able to keep control [k]
• Keep all the profits made [k]
4(a) What is meant by ‘multinational company’? 2 Do not award answers such as sells in
many countries as this could also apply to
Clear understanding [2]: those with factories, production or service an exporter
operations in more than one country
OR a business with production or service operation in another country
outside its normal area of operation
Some understanding [1] e.g. has businesses everywhere OR worldwide
4(c) Identify and explain two ways in which AHP might have an impact on 4 Application marks may be awarded for
the environment. appropriate use of the following:
• mobile phones
Knowledge [2 × 1] – award 1 mark for each relevant way [max 2] • 80% sales (in Europe)
Application [2 × 1] – award 1 mark for each explanation in context • comply with legal controls
• relocate its factories
Reasons might include: • multinational company
• country X
• Pollution [k] caused by disposal of mobile phones [app] • transporting extra 4000 km
• Loss of green spaces [k] from relocating its factory [app] • raw materials
• Traffic congestion [k] caused by transporting materials an extra
4000 km [app]
• Depletion of natural resources [k]
4(d) Identify and explain two ways in which an increase in interest rates 6 Application marks may be awarded for
might affect AHP appropriate use of the following:
4(e) Do you think AHP should relocate its factories to a low-cost country in 6 Application marks may be awarded for
Asia? Justify your answer. appropriate use of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) • mobile phones
Application [1] – award 1 mark for a relevant reference made to this • 80% sales (in Europe)
business • environmental concerns
Analysis [2] – award up to 2 marks for relevant development of point(s) • (relocate its) factories
Evaluation [2] – justified decision made as to whether AHP should relocate to • comply with legal controls
a low cost country in Asia • interest rates set to rise
• multinational
Relevant points might include:
• country X
• transporting raw materials extra 4000 km
• Further to reach its market [k] as 80% of sales in Europe [app] so may
not be able to react quickly to changes in demand [an] • raw materials
• Availability of suitable land [k] as will need a large area which will
increase the cost [an] Factories cannot be awarded as application
• Availability of suitable labour [k] to make the phones [app] in this question.
• Distance to raw materials [k] which is an extra 4000 km [app] which could
lead to delays in production [an]
• Negative reaction of local community [k] as there are environmental
concerns [app]
• Legal controls may restrict or encourage where it can locate [k]
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
11_0450_21_2018_1.16
© UCLES 2018 [Turn over
2
GT is a public limited company. It was set up 50 years ago in country Y. Shareholders were the
main source of capital when the business expanded but bank loans have also been used. The
company has recently allowed its employees to join a trade union which will have an effect on GT
and its employees.
The company manufactures a range of toys for babies and young children below school age. These
toys are sold to large toy shops throughout country Y and in other countries. However, the Marketing
manager wants to develop online sales. He thinks GT’s toys should only be sold using e-commerce,
not through retailers. This will help prevent any communication barriers.
The Operations manager thinks that GT needs to reduce average costs to remain competitive in
the global market. GT uses batch production to manufacture all the many designs of toys it sells.
The Operations manager also thinks that the development of new toys should be changed for the
different markets in other countries. Each market needs something different to make the toys a
success.
GT buys from suppliers in country Y that it has dealt with for many years. GT uses just-in-time
inventory control. The design of the toys has not been changed for a number of years. Sales have
fallen over the past 12 months. Prices were increased last year to maintain profit margins.
The Human Resources (HR) manager is worried about low levels of worker motivation and the time
taken to negotiate a new wage agreement for the production workers.
Appendix 1
Advertisement for GT
GT - your specialist quality toys. The greatest care goes into the design of each and every one of
our many toys. The education and safety of your child are our main priorities. Our toys are available
from all good toy shops at competitive prices.
Appendix 2
As discussed at our last meeting, we need to cut the average cost of making each toy. We could
choose cheaper suppliers but this may mean we have to buy from suppliers in other countries. We
could change the design of the toys so that we use fewer components (parts) when making the
toys.
We have tried to do this with our toy car. We can reduce the number of components from 50 to 40
if we make the main car body out of one piece of plastic rather than several pieces. We could look
at many of our other products to see if this is possible. We must be careful that it does not make
the toys less attractive to customers.
Appendix 3
GT Main competitor
Annual revenue for latest financial
$20m $25m
year
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
11_0450_21_2018_1.16
© UCLES 2018 [Turn over
2
1 (a) Identify and explain two advantages and two disadvantages of GT being a public limited
company.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage 1: ................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Disadvantage 2: ................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [8]
(b) Consider the advantages and disadvantages of the following two options for distributing GT
products. Recommend the option GT should choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Recommendation: ............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
2 (a) Identify and explain two roles of the Operations manager at GT.
Role 1: ..............................................................................................................................
...........................................................................................................................................
Explanation 1: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Role 2: ..............................................................................................................................
...........................................................................................................................................
Explanation 2: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Consider the following three ways GT can reduce the average cost of products. Recommend
the best way to choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Change the design of products so that they need fewer components: ............................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Recommendation: ............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
3 (a) Identify and explain two factors GT should consider when developing products for markets in
different countries.
Factor 1: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Factor 2: ...........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Consider how the following three communication issues affect GT. Which one of these issues
is likely to cause the biggest problem for GT? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
GT’s main communication method with its production workers is a weekly meeting: ......
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Conclusion: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
4 (a) Identify and explain one effect on GT and one effect on GT’s employees of workers being
members of a trade union.
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Refer to Appendix 3. Consider how the information in Appendix 3 will help the following three
users of accounts. Which user will find the information most helpful when taking decisions?
Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Conclusion: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
BLANK PAGE
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the October/November 2018 series for most
Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level
components.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these
features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question
(however; the use of the full mark range may be limited according to the quality of the candidate
responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.
Advantages:
• Limited liability
• Incorporated business with separate legal identify
• Shares can be issued to the general public
• Opportunity to raise very large sums of capital
• No restrictions on buying, transferring or selling of shares
• High status and easier to attract suppliers
Disadvantages:
• Quite complicated legal formalities
• Many regulations and controls including publication of
accounts/accounts can be seen by competitors
• Selling shares to the public is expensive
• Danger the owners may lose control if too many shares are issued/risk
of takeover
Advantages Disadvantages
2(a) Identify and explain two roles of the Operations manager at GT. 8
2(b) Consider the following three ways GT can reduce the average cost of 12
products. Recommend the best way to choose. Justify your answer.
Advantage Disadvantage
3(a) Identify and explain two factors GT should consider when developing 8
products for markets in different countries.
Award 1 mark for each relevant factor (maximum of 2), such as:
• Size/nature of the market – e.g. product may need adapting to meet
different trends in the toy market
• Legal requirements – e.g. product design must meet safety
requirements
• Language – e.g. talking dolls may need adapting to speak different
languages
• Competition – e.g. needs to develop a product with a USP that is
different to competitor’s product
• GDP/income levels – e.g. may need to adapt product to be lower cost
which is affordable to low-income countries
• Cultural differences – e.g. dolls’ clothing may need to be different style
or colour.
3(b) Consider how the following three communication issues affect GT. 12
Which one of these issues is likely to cause the biggest problem for
GT? Justify your answer.
4(a) Identify and explain one effect on GT and one effect on GT’s 8
employees of workers being members of a trade union.
Award 1 mark for an effect on GT and one mark for an effect on GT’s
employees (maximum of 2), such as:
Effect on GT
• Easier to negotiate with just one organisation representing all
employees at GT
• May have to face increased wage costs if union successfully negotiates
a pay rise
• Improve communication between managers and workers
• Improve relations between managers and workers
• May be affected by industrial action
Benefits
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
06_0450_11_2018_1.17
© UCLES 2018 [Turn over
2
1 GKA is a food retailer. It has 300 shops located in areas where average consumer incomes are
low. GKA sells a limited range of own-label products including breakfast cereal and toothpaste.
GKA does no promotion or market research. The Managing Director said: ‘Last year our market
share increased to 5%. Profit increased by 40%. Keeping costs low means GKA can offer customers
quality products at low prices.’ GKA is planning to open 100 shops in areas with high average
consumer incomes.The Managing Director must decide whether GKA should change its pricing
strategy (method) as the business expands.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
Aim 1:................................................................................................................................
...........................................................................................................................................
Aim 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two methods of market research that GKA could use.
Method 1:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Method 2:...........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two ways in which GKA could keep costs low.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think GKA should change its pricing strategy as the business expands? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
2 SJD is in the private sector. It makes steel for construction businesses. SJD plans to make 3500
of its 9000 employees redundant. The Operations Director said: ‘Cheap steel imports and high
business tax rates are affecting our business. There are also ethical issues that we must respond
to. The Government should do more to help steel producers. Some of our competitors plan to close
their factories and relocate to other countries. SJD may have to do the same.’
(a) Identify two situations in which downsizing the workforce might be necessary.
Situation 1:.........................................................................................................................
...........................................................................................................................................
Situation 2:.........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible ethical issues that SJD might have to respond to.
Issue 1:..............................................................................................................................
...........................................................................................................................................
Issue 2:..............................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible problems for SJD if it decides to relocate its business.
Problem 1:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Problem 2:.........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Explain how each of the following factors might affect SJD’s business.
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Cheap imports:..................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think the Government should help businesses like SJD? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
3 IBH is a family-owned private limited company. It makes a range of shoes for children, using batch
production. It is a competitive market. Like many businesses, IBH needs finance for a number of
reasons. The Finance Director has been looking at some financial data. An extract is shown in
Table 1. Some of the directors would like to expand into the women’s shoe market and want to
know whether IBH’s performance is improving.
2016 2017
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
Reason 1:..........................................................................................................................
(c) Identify and explain two possible advantages to IBH of being a private limited company.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to IBH of using batch production.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think IBH’s performance has improved in 2017? Justify your answer using profit margins.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
4 Ben owns a small gardening business, which he started 15 years ago. Ben believes providing a
quality service is important to his success. Ben’s business has a number of stakeholder groups
including 2 full-time and 4 part-time workers who have all been employed by him for a number of
years. Each worker is expected to do any job that Ben orders them to do. All workers are paid an
hourly wage rate. They also receive a bonus if customers recommend the business to other people.
Ben is always thinking about other ways to improve the motivation of his workers.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify two possible reasons why Ben’s business has remained small.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two reasons why quality might be important for Ben’s business.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to Ben’s business of having part-time workers.
Advantage 1:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2:.....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Explain two ways Ben could improve employee motivation. Recommend which way Ben should
choose. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the May/June 2018 series for most
Cambridge IGCSE™, Cambridge International A and AS Level and Cambridge Pre-U components, and
some Cambridge O Level components.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will also comply with these
marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the
scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may
be limited according to the quality of the candidate responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.
1(b) Identify two aims of promotion. 2 Question must relate to Marketing Mix.
Do not award answers related to staff
Award 1 mark per aim. promotion.
1(c) Identify and explain two methods of market research that GKA could 4 Application marks may be awarded for
use. appropriate use of the following:
• use of numbers such as 300 or 100
Award 1 mark for each method identified (shops)
Award 1 mark for each explanation in context • food retailer
• food / breakfast cereal
Points might include: • toothpaste
• observation / visiting competition [k] other food retailers [app] • high income / low income areas
• questionnaires [k] about the low prices [app] • change its pricing strategy
• surveys [k] about the own-label products [app] • low prices
• interviews [k] about the new shops [app] • quality products
• experiments / free samples / test marketing [k] the cereal [app] • limited range (of products)
• access government statistics [k] • no promotion
• focus groups / consumer panels [k] • own-label products
• use market research agencies [k]
• loyalty card data [k] (TV) Internet / online on own
• articles / newspapers / magazines[k] (NAQ) Primary / Secondary / Field / Desk
1(d) Identify and explain two ways in which GKA could keep costs low. 6 Application marks may be awarded for
appropriate use of the following:
Award 1 mark for each relevant way • use of numbers such as 300 or 100
Award 1 mark for each relevant reference made to this business (shops)
Award 1 mark for each relevant explanation • food retailer
• food / breakfast cereal
Relevant points might include: • toothpaste
• choose low cost locations [k] for all 100 sites [app] leading to lower • high income / low income areas
fixed costs [an] • limited range (of products)
• pay minimum wage [k] to shop workers [app] keep variable costs • no promotion
low [an] • low prices
• economies of scale [k] (only once) for its limited range of products • quality products
[app] leading to lower average costs [an] • own-label
• set lower marketing budget [k] as no money spent on market • market share increased 5%
research [app]
• profit increased by 40%
• replace workers with machinery / automation / reduce workforce [k]
• cheaper supplier [k] Do not award analysis for answers that
• close some locations [k] which would reduce electricity cost [an] clearly refer to manufacturing such as Lean
• set up online [k] production.
• reduce waste [k]
• Buy direct from manufacturer [k] so lower cost than buying from
wholesaler [an]
1(e) Do you think GKA should change its pricing strategy as the business 6 Application marks may be awarded for
expands? Justify your answer. appropriate use of the following:
• use of numbers such as 300 or 100
Award 1 mark for identification of relevant point (s) (shops)
Award 1 mark for a relevant reference made to this business • food retailer
Award up to 2 marks for relevant development of point(s) • food / breakfast cereal
Award up to 2 marks for a justified decision made as to whether GKA should • toothpaste
change its pricing strategy as the business expands. • high income or low income areas
• limited range (of products)
Relevant points might include: • no promotion
• identification of a pricing strategy [k] • quality products
• actions of competitors [k] • low prices
• cost of new locations [k] in high income areas [app] may make it • try to keep costs low
hard to control costs [an]
• market share increased 5%
• diseconomies of scale [k] from extra 100 shops [app] leading to a
• profit increased by 40%
rise in average costs [an]
• economies of scale[k] may allow them to charge lower prices[an] Note: question should focus on whether
• current prices give the image of poor quality [k] because they are business should change its pricing strategy
low prices [app] so may not attract new customers [an] not just increase or decrease price.
• they would lose their USP if they change price [k] leading to a loss
of the current customer base [an] in areas where average incomes
are low [app]
2(a) Identify two situations in which downsizing the workforce might be 2 Do not award answers discussing who
necessary. should be removed from the workforce e.g.
poor attendance
Award one mark per situation
2(b) Identify two possible ethical issues that SJD might have to respond to. 2 Ethical issues raised must relate to SJD
Do not reward aspects covered by law
Award 1 mark per ethical issue.
2(c) Identify and explain two possible problems for SJD if it decides to 4 Application marks may be awarded for
relocate its business. appropriate use of the following:
• cheap imports
Award 1 mark for each problem identified • steel
Award 1 mark for each explanation in context • iron
• high tax rates
Points might include: • ethical issues
• access to / cost of available space [k] for steel production [app] • 3500 or 9000
• legal controls / level of government support [k] in other countries • competitors plan to close factories
[app] • construction businesses
• access to suitable / cost of workers [k] for private sector business • (other) countries
[app] • private sector
• availability / cost of raw materials [k] such as iron [app] • factory
• access to / cost of infrastructure e.g. transport and energy [k]
• level of competition [k]
• exchange rates / currency issues [k]
• cultural issues e.g. different working hours [k]
• language / communication difficulties [k]
• trade restrictions / obtaining permits [k]
2(d) Explain how each of the following factors might affect SJD’s business. 6 Application marks may be awarded for
appropriate use of the following:
Award 1 mark for each relevant point • steel
Award 1 mark for each relevant reference made to this business • iron
Award 1 mark for each relevant explanation • ethical issues
• 3500 or 9000
Relevant points might include: • competitors plan to close factories
• construction businesses
High business tax rates: • private sector
• reduces profit [k] so may need to make more workers redundant • producer
[app]
• (other) countries
• increase prices [k] so may lead to lower demand [an] from
• government support
construction businesses [app]
• employees redundant
• increases costs [k] leading to less profit [an] for this private sector
• relocation
business [app]
Do not award reference to cheap imports /
Cheap imports:
high business tax rates, as application. This
• reduced demand [k] for steel [app] as its customers are able to buy
is in the question.
from rivals [an]
• may reduce prices [k] so revenue is reduced [an]
• lower costs of production [k] as this is a producer [app] as raw
materials may be cheaper [an]
• reduce market share [k]
2(e) Do you think the Government should help businesses like SJD? 6 Application marks may be awarded for
Justify your answer. appropriate use of the following:
• cheap imports
Award 1 mark for identification of relevant point (s) [max 1] • steel
Award 1 mark for a relevant reference made to this business • iron
Award up to 2 marks for relevant development of point(s) • high tax rates
Award up to 2 marks for a justified decision made as to whether the • ethical issues
Government should help businesses like SJD • 3500 or 9000
• competitors plan to close factories
Points for might include:
• construction
• protect jobs [k] as they plan to make 3500 redundant [app] which
• private sector
would increase unemployment [an] and the cost of paying
• producer
unemployment benefits [an]
• (other) countries
• protect the vital industry [k] of steel [app] to ensure supply in their
own country [an] • relocate
• impact on other businesses [k] who need the material for
Do not award government support as
construction [app]
application as referred to in the question.
• government could lose tax revenue if they fail [k]
Do not award answers which focus on how
Points against might include:
governments will help businesses
• there is an opportunity cost / helping businesses would require
money from the government [k] money spent on helping SJD will
reduce the money available for other projects [an]
• can obtain materials from other countries [k] as have access to
cheap imports [app]
• environmental impact of business [k] as industry creates pollution
[an]
• it is not the role of government [k] to help private sector business
[app]
• disincentive for businesses to be successful [k] this could lead to
them being inefficient [an]
3(a) What is meant by ‘non-current liabilities’? 2 Do not award ‘long term liabilities’ as this is
the alternative name for the term
Clear understanding [2]: debts / loans repayable in more than 12 months [2]
Or Money owed for more than a year [2] Do not credit ‘liability’ as stated in question
Some understanding [1]: e.g. debts or money owed [1] Some understanding plus a relevant
Or repayable in more than 12 months [1] example can gain 2 marks. i.e. money owed
for example bank loan
3(c) Identify and explain two possible advantages to IBH of being a private 4 Application marks may be awarded for
limited company. appropriate use of the following:
• family (owned)
Award 1 mark for each advantage identified • want to expand
Award 1 mark for each explanation in context • shoes or related words such as
leather, children, women
Points might include: • competitive market
• can control who buys shares [k] so can keep control in this • needs finance
competitive market [app] • directors
• easier to raise finance / able to sell shares [k] as they want to
expand [app] Do not award private limited company as
• seen as more creditworthy to suppliers [k] so could be more willing application, as this is stated in the question.
to supply leather [app]
• limited liability [k] this keeps personal assets of family safe [app]
• incorporation / separate legal identity [k]
• no need to publish accounts [k]
• continuity [k]
3(d) Identify and explain two advantages to IBH of using batch production 6 Application marks may be awarded for
appropriate use of the following:
Award 1 mark for each relevant advantage • want to expand
Award 1 mark for each relevant reference made to this business • shoes or related words such as
Award 1 mark for each relevant explanation leather, children, women
• competitive market
Points might include: • correct references to data in
• economies of scale [k] to reduce average costs [an] to increase the Table 1
profit above $120 000 [app] • needs finance
• allows variety of products [k] so easier to meet demand for different • directors
styles [an] of shoes [app] • private limited company
• flexibility / easy to switch production [k]
• limited quantity [k] so if children's tastes change [app] so not left The advantage needs to clearly relate to the
with unwanted stock [an] business not the worker
• variety of tasks for workers [k] which increase worker motivation
and output [an]
• production may not be affected if machinery breaks down [k]
• spread risk [k] as they are not reliant on one product for all sales
[an]
3(e) Do you think IBH’s performance has improved in 2017? Justify your 6 Application marks may be awarded for
answer using profit margins. appropriate use of the following:
• want to expand
Award 1 mark for identification of relevant point • shoes or related words
Award 1 mark for relevant reference made to this business • correct use of data from Table 1
Award up to 2 marks for relevant development of point(s) • (use of $000 not required)
Award up to 2 marks for a justified decision made as to whether IBH’s • competitive market
performance has improved or not • directors
• private limited company
Points might include:
• revenue increased [k] by 80 000 [app] To gain analysis mark at least one profit
• non-current liabilities have increased [k] by 100 000 [app] margin must be calculated. % sign is not
• gross profit increased [k] by 80 000 [app] required.
• profit has remained the same [k]
• gross profit margin increased [k] from 60% [app + an] to 67% [an] Accept 66% or 67% for gross profit margin.
• gross profit margin increased [k] by 6–7% [app + an + an]
• (net) profit margin has fallen [k] from 30% [app + an] 25% [an]
• (net) profit margin fallen [k] by 5% [app + an + an]
4(a) What is meant by ‘stakeholder group’? 2 Do not award examples as this does not
answer the question.
Clear understanding [2]: any group or person with a (direct) interest in the
performance / activities of a business Do not award affects/influences the
decisions
Some understanding [1]: someone affected by a business [1] or anybody
inside or outside the business who cares about its operations [1]
4(b) Identify two possible reasons why Ben’s business has remained small. 2 (TV) State of economy
4(c) Identify and explain two reasons why quality might be important for 4 Application marks may be awarded for
Ben’s business. appropriate use of the following:
• small (business)
Award 1 mark for each reason identified • gardening or related words such as
Award 1 mark for each explanation in context cutting grass
• (business) success
Points might include: • bonus
• help establish loyalty [k] which can help improve his business • recommendation
success [app] • 15 years ago
• increase sales / revenue / attract new customers [k] through more
recommendations [app]
• improve reputation / brand image [k] for his gardening business
[app]
• no need for rework [k]
• able to charge high prices [k]
• maybe his USP[k]
4(d) Identify and explain two advantages to Ben’s business of having part- 6 Application marks may be awarded for
time workers. appropriate use of the following:
• small (business)
Award 1 mark for each relevant advantage • gardening or gardening related
Award 1 mark for each relevant reference made to this business words allowed once
Award 1 mark for each relevant explanation • (business) success
• bonus
Points might include: • hourly wage rate
• more flexible / help meet demand during busy times [k] can cover • recommendation
when full-time workers not available [app] so work is completed on • 15 years ago
time [an] • 4 (part-time), 2 (full-time)
• help retain experienced employees [k] who have worked there for a
number of years [app] so reducing his recruitment costs [an] Do not award answers which clearly
• can add more skills / experience to business [k] to increase confuse part-time with seasonal workers.
demand [an]
• help attract / easier to find workers [k] Do not award answers that suggest that
• do not have to pay holiday / sick pay [k] part-time are easier to dismiss
• may be more motivated [k] so productivity would rise [an]
• part-time workers don’t work as many hours [k] Ben pays an hourly Do not award answers such as cheaper
wage rate [app] therefore the total wage bill would be lower [an] unless explained as all paid an hourly wage
rate.
4(e) Explain two ways Ben could improve employee motivation. 6 Application marks may be awarded for
Recommend which way Ben should choose. Justify your answer. appropriate use of the following:
• small (business)
Award 1 mark for identification of relevant point (s) • gardening or related words such as
Award 1 mark for relevant reference made to this business cutting grass
Award up to 2 marks for relevant development of point(s) • (business) success
Award up to 2 marks for a justified decision made as to which way Ben • service
should use to improve employee motivation. • customer recommendation
• seasonal (as gardening may not be
Points might include: needed all year)
• change method of payment / increased rate of pay [k] • ordered to do jobs
• training [k] so feel more valued [an] • 15 years ago
• involve workers in decision making [k] so workers feel more • 4 (part-time), 2 (full-time)
important [an] to the gardening business [app] • hourly wage rate
• change leadership style [k] Ben orders workers to do jobs [app] • employed for a number of years
• chance for promotion / become full time [k]
• job rotation [k] for the 6 employees [app] so employees are not Do not award bonus as knowledge
bored doing the same thing [an] (currently does offer this)
• job enlargement [k]
• job enrichment [k] For evaluation marks to be awarded two
• employee of the month [k] therefore workers feel like their hard relevant ways must have been explained
work is being recognised [an]
• praise [k] meeting employees esteem needs [an]
• team working / communication [k]
• fringe benefits [k]
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
06_0450_21_2018_1.15
© UCLES 2018 [Turn over
2
Peter is a qualified fitness instructor. He used to work at a luxury gym in country X. Customers of
this luxury gym pay a high monthly membership fee no matter how many times they visit. There
are no additional fees.
Peter enjoys helping people get fit and lose weight and he enjoys teaching exercise classes. Peter
wanted to help more people to get fit or build up their muscles so he decided to set up his own
gym. Peter thought there was a demand for low priced gyms that allowed people to pay each time
they used it rather than pay a high monthly fee. So he left his job and set up his own gym in a low
income part of the city. Peter named his business Value Gym (VG) and opened it three months
ago. Peter needed a large bank loan to help him set up his gym as he only had $5 000 of his own
money. He is a sole trader. He prepared a business plan to show the bank manager.
VG has been very successful and Peter is expecting to make a profit by the end of his first year as
an entrepreneur. However, he still wants to attract more customers to the gym. He knows that
marketing will be very important if his business is to expand.
Peter has estimated that VG will soon need 4 personal trainers to work in the gym. Peter has not
decided whether to employ these personal trainers or to allow personal trainers who work for
themselves to use VG's facilities for a fee. The gym is open from 0600 until 2200, 7 days a week.
Customers pay for each day they use the gym. In addition customers can pay for a personal trainer
if they want individual tuition.
Appendix 1
Appendix 2
500
400
Total Costs
300
$
200
0
0 10 20 30 40 50
customers per day
Appendix 3
The government of country X is worried about the increasing health problems of the population. It
wants more people to lose weight and get fit. This could make employees more productive and
increase output for the businesses where they work.
A government grant is being given to anyone who owns a gym and has more than 20 customers
a day. It is planned that the grants will be used to encourage more people to use a gym and get
fit.
There is expected to be an increase in demand for personal trainers, especially to work in the
evening. They will need to have qualifications in personal training to meet the health and safety
regulations for working in a gym. Most personal trainers are paid the minimum wage. However it
is expected that their wages will have to increase, as there will be a shortage of personal trainers
until more people can gain qualifications in personal training.
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
06_0450_21_2018_1.15
© UCLES 2018 [Turn over
2
1 (a) Identify and explain two ways a business plan could have helped Peter when setting up Value
Gym.
Way 1:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2:................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Consider the following three roles of marketing in Peter’s business. Which one of these is the
most important role? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
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Conclusion:........................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [12]
2 (a) Identify and explain four reasons why making a profit is important to Peter.
Reason 1:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 2:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 3:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
Reason 4:..........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
........................................................................................................................................... [8]
(b) Peter is considering the following two options. Recommend which option he should choose.
Justify your answer.
Charge a fixed fee to personal trainers who work for themselves to use VG’s facilities
with their clients:
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
Recommendation:................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
...........................................................................................................................................................................
[12]
3 (a) Identify and explain two legal controls that could affect Peter when recruiting and employing
workers.
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) (i) Refer to Appendix 2. Complete the break-even chart below by drawing the Total Revenue
line.
500
400
Total Costs
300
$
200
0
0 10 20 30 40 50
customers per day
[1]
................................................................................................................................ [1]
(iii) Consider the following two ways Peter could use to try to increase profit. Recommend
which way he should choose. Justify your answer.
Increase prices:......................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
Recommendation:..................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................ [10]
4 (a) Identify and explain one advantage and one disadvantage of leasing all the equipment used
in the business.
Advantage:........................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage:....................................................................................................................
...........................................................................................................................................
Explanation:.......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Consider how the following three changes will affect VG. Which one will have the biggest
effect on the business? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Conclusion:........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the May/June 2018 series for most
Cambridge IGCSE™, Cambridge International A and AS Level and Cambridge Pre-U components, and
some Cambridge O Level components.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these
features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question
(however; the use of the full mark range may be limited according to the quality of the candidate
responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.
1(a) Identify and explain two ways a business plan could have helped Peter 8
when setting up Value Gym.
Award one mark for each way (maximum of two), such as:
Award a maximum of three additional marks for each explanation of the way –
2 of which must be applied to this context.
Indicative response:
Peter will have written the business plan to help him gain finance. (1) Peter will
have taken it to show the bank manager to help persuade him to give VG the
loan needed to start the gym. (ap) The business plan will show financial
forecasts to show that the business will be able to repay the loan. (1) Therefore
after the bank has given Peter the loan he will have the capital he needs to set
up the gym and start signing up members. (ap)
There may be other examples in context that have not been included here.
E.g. Carry out market research to find out what gym equipment customers
want
E.g. Carry out market research to find out what gym equipment customers
want. The right equipment, such as a cross trainer, needs to be purchased so
that customer needs are met. However, it can be time consuming and
expensive to carry out the market research required to ensure this happens.
(Level 2 plus one application mark for answering in the context of the gym and
its equipment)
9–10 marks for well justified conclusion of the most important role of marketing
AND why the other roles are less important.
There may be other examples in context that have not been included here.
2(a) Identify and explain four reasons why making a profit is important to 8
Peter.
Award one mark for each reason (maximum of four), such as:
• Source of finance/retained profit/Peter could use the profit for reinvestment
– expand the gym by buying new equipment
• To ensure survival of the business/avoid closure
• Reward for enterprise – reward for Peter’s hard work/good ideas to start
the business
• Reward for risk taking – Peter risked losing his investment of $5,000
• Indicator of success – the more profit Peter makes the more his success
will be recognised by customers/employees
Award a maximum of one additional mark for each explanation suitable for this
context.
Indicative response:
It is a reward for risk taking (1) as Peter has risked $5,000 of his own money in
the business and could have gained interest on this money if he had put it in
the bank.(1)
2(b) Peter is considering the following two options. Recommend which option 12
he should choose. Justify your answer.
Advantages Disadvantages
• Full control over • Pay trainers whether or
Employ his trainers not they have clients
own personal • Higher profit • More expensive when
trainers especially when not busy
busy with many
clients
Charge a fixed • Fixed amount paid • Additional revenue/profit
fee to personal to VG lost to gym
trainers who • Risk of low • Cannot control the
work for demand taken by quality of the training
themselves to the trainer provided for clients
use VG facilities • Less expenses as • Maybe unreliable and
with their clients no wages to pay this could affect
each month reputation of VG
E.g. Peter has full control over his own trainers if he employs them.
There may be other examples in context that have not been included here.
3(a) Identify and explain two legal controls that could affect Peter when 8
recruiting and employing workers.
Award one mark for each legal control (maximum of two), such as:
• Pay minimum wage
• Employer liability insurance required
• Legal citizenship/work permit/licence required
• Ensure a safe working environment/Health and Safety laws observed
• No discrimination when recruiting workers
• Not employing children
• No unfair dismissal
• Number of hours worked may have a maximum limit
Award a maximum of three additional marks for each explanation of the legal
control – 2 of which must be applied to this context.
Indicative response:
It is important to pay at least the minimum wage (1) set by the government or
the owner will be prosecuted. (1) This may mean that Peter has to pay higher
wages than he wants to pay and the wage costs of the gym might be high. (ap)
It might mean that Peter cannot afford to employ as many trainers as he wants
at the gym due to the high cost. (ap)
There may be other examples in context that have not been included here.
3(b) Refer to Appendix 2. Complete the break-even chart below by drawing the 12
Total Revenue line.
3(b)(iii) Consider the following two ways Peter could use to try to increase profit.
Recommend which way he should choose. Justify your answer.
Advantages Disadvantages
Increase • Increase in revenue if • Possible decreased
prices same number of gym demand – as situated in low
members remain income area – so overall
• Increase inflows of effect may not be to
cash increase revenue and
• Reduces break-even inflows
number of customers • Expect higher quality
facilities so may need to
invest in more equipment
Reduce • Less outflows • Lower quality provision
variable • Increased profit • Deter customers as
costs • Reduces break-even perceived as reduced
number of customers service
E.g. Increasing prices will increase inflows from increased revenue which will
help to increase the profit at the gym. However, if prices are much higher than
similar competing gyms then VG will lose customers and cash inflows will fall.
4(a) Identify and explain one advantage and one disadvantage of leasing all 8
the equipment used in the business.
Advantage
• The business does not have to find a large sum of cash to purchase
the equipment
• Care and maintenance is carried out by the leasing company
• When the lease expires the latest equipment could be obtained
Disadvantage
• Total cost of leasing higher than to purchase the equipment outright
• The equipment is not owned by VG
• Cannot sell the equipment if not needed any more
Indicative response:
The business does not have to find a large sum of cash in one go (1) as the
equipment can be leased even if VG does not have the cash to buy it outright.
(ap) This means VG can have better quality equipment such as treadmills for
the gym at the start (ap) which will allow Peter to get the gym set up quicker
and with better equipment than if he had to find all the cash at the start. (1)
There may be other examples in context that have not been included here.
4(b) Consider how the following three changes will affect VG. Which one will 12
have the biggest effect on the business? Justify your answer.
Advantages Disadvantages
A multinational • Encourages • Increased competition so
chain of luxury increased gym may lose some existing
gyms recently membership for all gym members
set up in gyms as it becomes • May lose some staff such
country X more fashionable to as personal trainers to the
go to a gym new gyms so will need to
• May have no effect be replaced
as aimed at different • May need to increase
market segment wages to retain staff
• Little effect as low
income workers
cannot afford luxury
gym membership
There is an • Increased demand • May change the image of
increased for exercise classes the gym and puts off
proportion of for the elderly potential younger
elderly people because they have customers
in the more leisure time • Increased costs of
population • More potential providing trainers
elderly customers specialised in providing
leads to increased classes or tuition for
revenue elderly members
• Elderly people more • Revenue may fall if the
likely to lead a elderly do not go to the
healthier lifestyle – gym
encouraged by
government
campaign
Interest rates • Higher costs of • Increased costs of
have borrowing means borrowing if VG needs to
increased pressure on family take loans to purchase
income – less more gym equipment for
demand for high expansion or replacement
priced luxury gyms – of equipment
increased demand • Less discretionary income
VG by members reduces less
important spending
E.g. Lower demand for gyms as less income left over after essential bills paid.
E.g. Lower demand for gyms as less income left over after essential bills paid.
Therefore the number of members and therefore revenue might fall for VG.
However, as VG is a low cost gym it might attract members from luxury gyms
and so membership might increase. (Level 2 plus one application mark for
answering in the context of the gym membership)
There may be other examples in context that have not been included here.
Write your centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
06_0450_11_2019_1.9
© UCLES 2019 [Turn over
2
1 Y2M is a bus operating company in the public sector. One of its objectives is to break even on
every bus route. Most of its competitors are in the private sector. Y2M wants to increase the number
of customers using its buses. The Finance Director has been looking at some cost data shown in
Table1. This is because Y2M plans to review its pricing methods. She is worried other businesses
pay workers a higher wage rate and some of its drivers may leave. She said: ‘To pay the same
wage rate would increase variable cost to $2.20 per passenger per journey.’
...........................................................................................................................................
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........................................................................................................................................... [2]
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(c) Identify and explain two objectives Y2M might have if it was in the private sector.
Objective 1: .......................................................................................................................
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Explanation: ......................................................................................................................
...........................................................................................................................................
Objective 2: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two pricing methods Y2M could use.
...........................................................................................................................................
Explanation: ......................................................................................................................
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Explanation: ......................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think Y2M should pay its workers the same wage rate as its competitors? Justify your
answer.
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2 Kate is an entrepreneur. Two years ago she left her job as a fashion designer at a multinational
company. She started up BBB, a women’s sportswear clothing business. BBB targets a market
segment of high income consumers. BBB’s products are sold in 3 retail shops and also through its
website. Kate said: ‘I saw a gap in the market and took the risk. Obtaining the finance I needed
from the bank was not easy. I enjoy making decisions such as using leaflets to promote the clothes.’
BBB’s revenue target for next year is $500 000.
...........................................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [2]
(b) Identify two reasons why obtaining finance may not be easy for a new business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why Kate decided to start up her own business.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two reasons why segmenting the market might help BBB.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
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Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
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........................................................................................................................................... [6]
(e) Do you think that using leaflets is the best way for Kate to promote her products? Justify your
answer.
...........................................................................................................................................
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........................................................................................................................................... [6]
3 BVC makes a range of paints. It exports 60% of its products. The Managing Director has been
looking at BVC’s cash-flow forecast shown in Table 2. He said: ‘Success is not just about our return
on capital employed.’ The Managing Director is worried about the introduction of new legal controls
to protect the environment. This will mean BVC will have to reduce the number of chemicals that
are used to make paint. He thinks these new legal controls will be bad for business.
Table 2: Extract of cash flow forecast for the period July–September 2019 ($000)
Opening balance X 60 80
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
X: ......................................................................................................................................
Y: ...................................................................................................................................... [2]
(c) Identify and explain two reasons why a cash flow forecast might be important for BVC.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two possible problems for BVC when exporting its products.
Problem 1: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Problem 2: ........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) The Managing Director thinks the new legal controls to protect the environment will be bad for
business. Do you agree? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
4 FGH is a private limited company. FGH has a tall hierarchical organisational structure. It is a book
retailer which plans to take over one of its competitors for $800m. If the takeover happens, FGH
would have 6 500 bookshops across 20 countries. FGH’s Managing Director said: ‘We expect to
reduce total costs by $300m each year after the takeover. We will stop all off-the-job training of
employees.’ The Managing Director thinks FGH would benefit from becoming a public limited
company but some of the other directors cannot decide if this is a good idea.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages of FGH having a tall hierarchical organisational structure.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain one advantage and one disadvantage to FGH of becoming a public limited
company.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think FGH should take over the other business? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
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To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment
International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the May/June 2019 series for most
Cambridge IGCSE™, Cambridge International A and AS Level and Cambridge Pre-U components, and
some Cambridge O Level components.
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will also comply with these
marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the
scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may
be limited according to the quality of the candidate responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.
1(a) What is meant by ‘break-even’? 2 Accept the formula Fixed costs / contribution [2]
1(b) Calculate the revenue per day. 2 $ not required for [2]
1(c) Identify and explain two objectives Y2M might have if it was in 4 Application marks may be awarded for appropriate use
the private sector. of the following:
Knowledge [2] award 1 mark for each objective identified • bus or related words e.g. tickets drivers,
passengers, trips, routes, journey
Application [2] award 1 mark for each explanation in context • appropriate use of numbers from Table 1
• public sector
Relevant point might include: • increased number of customers
• profit [k] so prices for journeys could be set higher [app] • competitors
• reduce costs [k] as it is more concerned about profit than • pricing methods
providing bus services [app]
• higher / same wage rate
• increased returns to shareholders [k]
• break-even
• survival [k]
• growth / increase sales [k] Do not accept – Break even on all bus routes as this is
• increased market share [k] their current public sector objective.
• improved service [k]
1(d) Identify and explain two pricing methods Y2M could use. 6 Application marks may be awarded for appropriate use
of the following:
Knowledge [2 × 1] – award 1 mark for each relevant method
• bus or related words e.g. tickets drivers,
Application [2 × 1] – award 1 mark for each relevant reference to passengers, trips, routes, journey
this business • appropriate use of numbers from Table 1
• public sector
Analysis [2 × 1] – award 1 mark for each relevant explanation • private sector
• increased number of customers
Points might include: • competitors
• competitive pricing [k] charging similar prices will retain existing • higher/ same wage rate
[an] passengers [app]
• variable costs
• cost plus pricing [k] as Y2M aims to break even [app] so price
• break even
must cover costs [an]
• promotional pricing [k] lower prices encourages more people to
Accept dynamic pricing and psychological pricing as
use [an] its bus services [app]
these are appropriate pricing methods for transport
• penetration [k]
• skimming [k]
1(e) Do you think Y2M should pay its workers the same wage rate 6 Application marks may be awarded for appropriate use
as its competitors? Justify your answer of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) • bus or related words e.g. tickets, drivers,
passengers, trips, routes, journey
Application [1] – award 1 mark for a relevant reference made to this • appropriate use of numbers from Table 1
business • public sector
• private sector
Analysis [2] – award up to 2 marks for relevant development of • increased number of customers
point(s)
• variable costs
• break even
Evaluation [2] – justified decision made as to whether Y2M should
• $2.20
pay its workers the same wage rate as its competitors
2(b) Identify two reasons why obtaining finance may not be easy 2 Do not accept ‘not well known ‘as it is unclear how this
for a new business. relates to finance.
2(c) Identify and explain two possible reasons why Kate decided to 4 Application marks may be awarded for appropriate use
start up her own business of the following:
Knowledge [2 × 1] – award 1 mark for each relevant reason • Fashion / sports clothing or related words
• 3 retail shops
Application [2 × 1] – award 1 mark for each relevant reference to • 2 years
this business • website
• leaflets
Points may include: • multinational
• To be her own boss [k] instead of working for a multinational • market segmentation / high income/ women
business [app] • entrepreneur
• To make her own decisions [k] e.g. how to promote clothes • spotted a gap in the market
[app]
• obtaining finance
• She believes the business could be successful / make profit [k]
• $500 000
as she spotted a gap in the market [app]
• To work on something she enjoys [k]
2(d) Identify and explain two reasons why segmenting the market 6 Application marks may be awarded for appropriate use
might help BBB. of the following:
Knowledge [2 × 1] – award 1 mark for a relevant reason • Fashion / sports clothing or related words
• 3 retail shops
Application [2 × 1] – award 1 mark for each explanation in context • 2 years
• website
Analysis [2 × 1] - award 1 mark for each relevant explanation • leaflets
• multinational
Relevant points might include: • high income/ women
• Able to tailor goods to specific needs OR know what to • entrepreneur
produce [k] • spotted a gap in the market
e.g. clothes for high income women [app] so that costs / • obtaining finance
materials are not wasted producing wrong products [an] • $500 000
• To help decide best place to sell [k] as sportswear [app] needs
a specialist shop to increase sales[an] Identify gaps in the market [k or app]
• Research is simpler/help identify customer needs [k] as know
which women to ask [app] so products better meet customer
needs [an]
• Help target advertising [k] such as where to use leaflets [app]
to ensure maximum number of people see them [an]
• Help set prices [k]
• Identify gaps in the market [k]
2(e) Do you think that using leaflets is the best way for Kate to 6 Application marks may be awarded for appropriate use
promote her products? Justify your answer of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) • Fashion / sports clothing or related words
• 3 retail shops
Application [1] – award 1 mark for a relevant reference made to this • 2 years
business • website
• multinational
Analysis [2] – award up to 2 marks for relevant development of • market segmentation / high income / women
point(s) • entrepreneur
• spotted a gap in the market
Evaluation [2] – justified decision made as to whether using leaflets
• obtaining finance
is the best way for Kate to promote her products
• $500 000
Relevant points might include:
• Leaflets can contain lots of information about her products [k] Can accept discussion of other appropriate methods of
these can be handed out outside gyms [app] to attract promotion e.g. sales promotions e.g. sponsorship,
appropriate target market which could lead to increased sales competitions.
[an]
• Leaflets can be handed out in the local area [k] around the 3 For evaluation, answers must have considered the
retail shops [app] which is cost effective [an] suitability of leaflets.
• People may throw leaflets away or see leaflets as litter [k]
• Cheaper than television or radio [k]
Award 1 knowledge mark for any other appropriate methods of
promotion
X 20 (20 000)
Y 40 (40 000)
3(c) Identify and explain two reasons why a cash flow forecast 4 Application marks may be awarded for appropriate use
might be important for BVC. of the following:
3(d) Identify and explain two possible problems for BVC when 6 Application marks may be awarded for appropriate use
exporting its products. of the following:
3(e) The Managing Director thinks the new legal controls to protect 6 Application marks may be awarded for appropriate use
the environment will be bad for business. Do you agree? of the following:
Justify your answer.
• paint
Knowledge [1] – award 1 mark for identification of relevant issue(s) • correct use of data from Table 2
• exported OR 60%
Application [1] – award 1 mark for a relevant reference made to this • chemicals
business • return on capital employed
• cash-flow forecast
Analysis [2] – award up to 2 marks for relevant development of
point(s)
4(c) Identify and explain two advantages of FGH having a tall 4 Application marks may be awarded for appropriate use
hierarchical organisational structure of the following:
4(d) Identify and explain one advantage and one disadvantage to 6 Application marks may be awarded for appropriate use
FGH of becoming a public limited company of the following:
Relevant points might include: Do not award limited liability or separate legal identity
as already has this as a private limited company.
Advantages
• Better access to capital [k] i.e. raising share capital from
existing and new investors [an] to pay for the takeover [app]
• Can give a company a more prestigious profile OR status [k]
so more likely to be offered credit OR better interest rates as
seen as lower risk [an] to raise capital to open more bookshops
[app]
• Shares tradeable on the stock exchange [k]
Disadvantages:
• Cannot control who buys the shares [k] so easier to be taken
over [an] by other book retailers [app]
• Shareholder may expect dividends to be paid [k]
• Accounts published [k] allowing competitors to be able to see
all their results [an] so the business FGH wants to take over
might reject its offer [app]
• Legal formalities need to be followed [k]
• Divorce of ownership and control [k]
4(e) Do you think FGH should take over the other business? 6 Application marks may be awarded for appropriate use
Justify your answer of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) • book retailer
• 6500 shops
Application [1] – award 1 mark for a relevant reference made to this • 20 countries
business • $300m
• on the job training
Analysis [2] – award up to 2 marks for relevant development of • $800m
point(s) • competitor
Evaluation [2] – justified decision made as to whether FGH should
Note: Cost of takeover $800m, saving $300m therefore
take over the other business
payback will be by 2 years 8 months. (2.66 years)
Points might include:
Note: accept examples of appropriate economies of
• Does not spread risk [k] as still in book retailing [app] so falling
scale [k]
demand for books will reduce FGH’s sales [an]
• Benefit from economies of scale [k] as would have 6500 shops
[app] helping to reduce average costs [an]
• Increase its market share [k] by removing a competitor [app]
• Can they afford to pay the cost of purchase [k] of $800m [app]
• Reduced total costs [k] means repayment of $800m [app]
within 2.66 years OR 2 years 8 months [an]
• Risk of diseconomies of scale [k] as communication errors may
arise [an] across 20 countries [app]
• Different management styles [k] may reduce productivity [an]
across all the shops [app]
• Cost savings may not happen [k]
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the May/June 2019 series for most
Cambridge IGCSE™, Cambridge International A and AS Level and Cambridge Pre-U components, and
some Cambridge O Level components.
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these
features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question
(however; the use of the full mark range may be limited according to the quality of the candidate
responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.
Indicative response:
SA can sell specialist products that meets these specific customer needs (k)
and SA wants to sell soap aimed at people with older skin. (ap) This means
that there are likely to be few competitors in this market as it is smaller and
less attractive for larger businesses making it easier to have a higher market
share and higher profits. (an). As incomes are increasing in country Z, older
people will be able to afford this soap. (ap)
There may be other examples in context that have not been included here.
1(b) Consider the following three roles of packaging for SA’s new products. 12
Which is the most important role for the successful launch of these
new products? Justify your answer.
Brand image • Makes the soap stand out from other products on the
shelves
• Differentiates products from competitors’ products
• Images on package reinforces brand
Knowledge/Analysis/ Evaluation
1(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Information
about the ingredients of the soap is necessary as some people might be
allergic to the soap.
There may be other examples in context that have not been included here.
2(a) Identify and explain how the following two stakeholder groups might 8
be affected by SA’s plans to expand.
Shareholders
• Higher dividend if the expansion is successful – may be lower dividend
is retailed profit used
• They might be asked to provide share capital – $15m required
• Change the market price of shares
• Increased risk of their investment
Local community
• Unemployment in the local area might fall/incomes in the local area
might rise
• More production jobs will be available
• May case environmental costs/damage/negative externalities
Indicative response:
Shareholders – The cost of expansion is $15m (ap) and they might be
asked to provide share capital (k). This could reduce the market price of
their shares in the soap company (ap) as it will take time for the new
investment to lead to higher profits and possibly higher dividends (an).
There may be other examples in context that have not been included here.
Knowledge/Analysis/ Evaluation
Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Higher output
likely to increase sales
There may be other examples in context that have not been included here.
3(a) Identify and explain two ways SA could use lean production in its 8
factory.
Indicative response:
Just-in-time (k) means that inventory is reduced to no or very low levels held
in storage. (an) This reduces the need for having warehouse space to hold
the ingredients to make soap. (ap) SA will need to have good relationships
with its suppliers to ensure that the flow production line is not interrupted by
inventory running out. (ap)
There may be other examples in context that have not been included here.
3(b) Consider three leadership styles the Operations manager could use in 12
the new factory. Recommend which leadership style should be used to
improve decision-making. Justify your answer
Knowledge/Analysis/ Evaluation
There may be other examples in context that have not been included here.
4(a) Identify and explain two opportunities and two threats for businesses 8
in country Z from globalisation.
Award one mark for each opportunity/threat (max 4) plus one additional
mark for an explanation of each opportunity/threat
Opportunities
• New markets – increased revenue
• Increased brand awareness
• Increased sales –higher profit
• Saturated home markets – new markets to develop
• Spread risks – over more markets/products
• New products developed – for new markets with different tastes
• Higher incomes in growing economies – increased disposable income
leading to higher sales
• Free trade agreements – may allow domestic companies easier access
to overseas market/Easier to export
• Access to cheaper supplies/cheaper labour – lowers costs
Threats
• Increased competition in the home market – lose market share – may
need to reduce prices
• Free trade agreements – may allow foreign companies easier access to
domestic market
• Jobs lost in industries that cannot compete with cheaper foreign
competition
• Workers may choose to work for MNC which pays better wages – losing
workers
• Pressure to increase wage rates due to match MNC pay
• Easier for exploitation by MNCs e.g. labour/natural resources
• May be more vulnerable to external shocks e.g. recession in main
export markets
Indicative response:
Country Z has signed a trade agreement (1) which provides opportunities
for businesses in country Z to sell in new markets abroad and increase
revenue (1).
Knowledge/Analysis/ Evaluation
4(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. The inventory
has increased by $5m (L1) as the inventory was $5m in 2017 and $10m in
2018 (1 × Ap).
There may be other examples in context that have not been included here.
Write your centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
11_0450_11_2019_1.14
© UCLES 2019 [Turn over
2
1 BFF makes a range of computer screens that it sells to other manufacturers. The Managing Director
has been looking at BFF’s income statement. She is worried about the effects of an increase in the
cost of materials. She said: ‘Changes in technology have improved our production methods. BFF
needs to remain competitive as imports of computer screens are increasing.’ The Managing Director
has to decide whether BFF should increase its prices.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Identify the effect of an increase in the cost of materials on each of the following:
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways in which BFF’s managers could use information contained in
the income statement.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two ways changes in technology used in production could help BFF to
remain competitive.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think BFF should increase its prices? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
2 WKN sells household goods such as plates and brushes. Last year sales in WKN’s 200 shops
increased but profit fell by 80% to $5m. WKN’s Human Resources Director said: ‘All retailers are
finding this stage of the business cycle challenging. WKN has to reorganise the business. This will
mean redundancy for 1800 shop workers. WKN plans to create 100 new jobs in the marketing
department at head office to help maintain customer loyalty. The company is working with trade
unions to carry out these changes.’ WKN has to decide whether to select the candidates for the
new jobs from the workers being made redundant.
Stage 1: ............................................................................................................................
...........................................................................................................................................
Stage 2: ............................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two ways a trade union could help WKN’s employees.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two advantages to WKN of maintaining customer loyalty.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think WKN should select all the workers for the new jobs from those about to be made
redundant? Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
3 Keila owns a successful small bakery shop. Keila would like to expand her business. She could
open a café selling cakes and drinks in a popular tourist location. Keila plans to give out free samples
as her main method of promotion. She has prepared some customer and cost information as shown
in Table 1. Keila used primary market research to find out some of the information.
Table 1: Forecast customer and cost information for the new café
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(b) Calculate the forecast revenue per week for the new café.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two advantages to Keila’s business of using free samples as a method
of promotion.
Advantage 1: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Advantage 2: ....................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain one advantage and one disadvantage to Keila’s business of using primary
market research.
Advantage: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Disadvantage: ...................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think Keila should open the new café? Justify your answer using the information in
Table 1.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
4 VXH produces a range of soft drinks made from fruit using batch production. VXH uses specialisation
in its factory. The business has grown quickly over the last two years. VXH has increased the
number of production workers from 40 to 80. This has increased the span of control for each
manager. It has been difficult for VXH to keep workers motivated. The Human Resources Manager
has to decide whether it is better to use job rotation or financial bonuses to improve employee
motivation.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain two possible reasons why VXH has grown quickly.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
........................................................................................................................................... [4]
(d) Identify and explain two possible reasons why VXH uses batch production.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think VXH should use job rotation or financial bonuses to increase employee motivation?
Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
BLANK PAGE
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment
International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the October/November 2019 series for most
Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level
components.
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will also comply with these
marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the
scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may
be limited according to the quality of the candidate responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.
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.
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:
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:
• 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.
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:
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
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:
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:
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]
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]
3(b) Calculate the forecast revenue per week for the new café. 2 $ sign not needed to award full marks
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:
• Can test out new product ideas [k] identified from research
[app]
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]
Disadvantages:
• High cost [k] to find out views on her bakery [app] which will
increase her expenses [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]
• How reliable is the data gathered [k] from her primary research
[app]
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]
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)
• Level of demand does not justify the use of flow production [k]
• Since larger numbers are made [k] lower unit costs [an]
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
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
11_0450_21_2019_1.13
© UCLES 2019 [Turn over
2
MF is a public limited company. It was set up 30 years ago in country X and produces a large variety
of food products. The objectives of MF are to increase profits and increase market share. Most of
MF’s competitors are small partnership businesses. MF is the largest food producer in country X.
The Operations Director is planning to produce a new ice cream that does not contain sugar.
Production of the new product will require a new automated production line. It will require new
equipment to be purchased. Additional skilled workers will need to be recruited by the Human
Resources department and existing workers will need to be retrained. To manufacture ice cream
that does not contain sugar, MF will have to use ingredients that are extracted from plants in the
rainforests in country X. This will cause environmental damage when the plants are cut down.
MF’s Operations Director is worried about the high cost of this raw material and the cost of removing
all the waste from the production of this new ice cream. The cheapest way to get rid of the waste
is to take it to local landfill sites, which are nearly full. The Government is responsible for the costs
of managing landfill sites. Farmers lose their land when new landfill sites are created.
The new ice cream will be targeted at people who want to lose weight or who, for medical reasons,
are not allowed to eat products that contain a lot of sugar. Statistics show that 10% of the adult
population should not be eating sugary foods and a further 40% are thought to be overweight.
Country X has several new TV programmes aimed at people who are health conscious and new
gyms are being set up. Several other food businesses in country X are planning the introduction
of new food products that are low in sugar but they are not yet ready to launch them. MF and its
competitors sell food products through wholesalers and to large supermarkets.
Appendix 1
2018 2019
Revenue $100m $120m
Current ratio 2 3
Appendix 2
Country X is experiencing increasing numbers of overweight people and this is causing serious
health problems. Food products which contain a lot of sugar are being blamed for this crisis. Treating
people who are overweight increases costs to public sector organisations such as health care
services. Businesses in country X also complain that when employees are ill they do not work
efficiently or they need time off work to get better.
Appendix 3
MF plans to set a price of $5 per carton of ice cream and plans for a variable cost (VC) of $2.50
per carton.
Break-even chart to show the effect of charging a higher price of $7.50 per carton
40 000
35 000
Costs and Revenue ($)
30 000
key
25 000
Fixed Cost
20 000 Total Cost
Total Revenue at $7.50
15 000
Total Revenue at $5
10 000
5000
0
0 1000 2000 3000 4000 5000
output per week
Break-even chart to show the effect of reducing the variable cost (VC) to $2.00 per carton
30 000
Costs and Revenue ($)
25 000
key
20 000
Fixed Cost
15 000 Total Cost when VC at $2.00
Total Revenue at $5
10 000
Total Cost when VC at $2.50
5000
0
0 1000 2000 3000 4000 5000
output per week
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment
International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
Write your centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
11_0450_21_2019_1.13
© UCLES 2019 [Turn over
2
1 (a) Identify and explain one benefit and one cost to MF of developing the new product.
Benefit: .............................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Cost: .................................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Consider how the following three elements of the marketing mix could help to make the new
product successful. Which do you think is the most important element for the success of the
new product? Justify your answer.
Price: ................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Place: ................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Promotion: ........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Conclusion: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
2 (a) Identify and explain how the following two stakeholder groups of MF will be affected by the
production of this new product.
Employees: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Customers: .......................................................................................................................
...........................................................................................................................................
Explanation: ......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Consider how each of the following might use MF’s financial statements as shown in Appendix 1.
Which user would find the information most helpful? Justify your answer.
Government: .....................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Bank: ................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Shareholders: ...................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Conclusion: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
3 (a) Identify and explain how the following four departments of MF are likely to be affected by the
development of its new product.
Marketing: .........................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Operations: .......................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Finance: ............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [8]
(b) Using the information provided in Appendix 3, consider the following two options for MF’s new
product. Recommend which option MF should choose to ensure the highest profit for the new
product. Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Option 2 - reduce the variable cost per carton from $2.50 to $2.00: ................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Recommendation: ............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
Difference 1: ..........................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
Difference 2: ..........................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................ [4]
Difference 1: ..........................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
Difference 2: ..........................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................
................................................................................................................................ [4]
(b) Consider the possible external costs and external benefits resulting from MF’s new product.
Recommend whether the Government should encourage MF to produce this new product.
Justify your answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Recommendation: ............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [12]
BLANK PAGE
BLANK PAGE
BLANK PAGE
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment
International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the October/November 2019 series for most
Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level
components.
This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these
features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.
Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question
(however; the use of the full mark range may be limited according to the quality of the candidate
responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.
1(a) Identify and explain one benefit and one cost to MF of developing the 8
new product.
Cost:
• Costs of carrying out market research/product trials
• Increased production costs – new equipment/training/recruitment
costs/high cost of raw materials/high cost of waste removal
• Increased marketing costs – to build customer awareness
• If target market wrong, the company reputation may be damaged
Indicative response:
Provides a USP (1) if there are no other sugar-free ice creams in the market
(ap). This will allow MF to increase sales revenue of the ice cream (1). This is
a new market and MF is taking advantage of the trends for healthier foods
(ap).
There may be other examples in context that have not been included here.
1(b) Consider how the following three elements of the marketing mix could 12
help to make the new product successful. Which do you think is the
most important element for the success of the new product? Justify your
answer.
Knowledge/Analysis/ Evaluation
1(b) Level 1 – 1 mark for each L1 statement (max of 3 marks), e.g. place can be
through wholesalers and supermarkets as they can sell a lot of the products to
this large market.
There may be other examples in context that have not been included here.
2(a) Identify and explain how the following two stakeholder groups of MF 8
will be affected by the production of this new product.
Employees
• increased production – output per worker increase
• increased job security – more skills acquired
• new production methods used – workers may not like change
• more training required – feel more motivated – gain more
• job satisfaction – gain higher wages
Customers
• more choice of products/ help to reduce weight for some consumers
• may not buy the new product – as customers are unhappy with the effect
on the environment
• better meets the needs of some customers – makes customers feel more
loyal to the company
• will have to pay a higher price if customers want the new ice cream
Indicative response:
Increased production (1) as the new sugar free ice cream will be produced
(ap). This will require further training for employees as the new equipment is
different to the original equipment in the factory (1) and the new automated
equipment that has been installed to produce the new ice cream will require
quite different skills (ap).
There may be other examples in context that have not been included here.
2(b) Consider how each of the following might use MF’s financial statements 12
as shown in Appendix 1. Which user would find the information most
helpful? Justify your answer.
Knowledge/Analysis/Evaluation
Level 1 – 1 mark for each L1 statement (max of 3 marks), e.g. the bank might
want to see if MF is making a profit to see if they can repay any loans.
There may be other examples in context that have not been included here.
3(a) Identify and explain how the following four departments of MF are likely 8
to be affected by the development of its new product.
Award one mark for an explanation of a likely way each department will be
affected (max 4)
Indicative response:
The Marketing department will have an increased workload from carrying out
market research (1). This is because the sugar-free ice cream is new and MF
will not know if consumers are interested in buying it (1).
There may be other examples in context that have not been included here.
Level 1 Level 2
Option 1 –raise price May put off potential B/E identified at 4000
from $5.00 to $7.50 customers/demand and now fallen to 2000
may fall Profit is $15 000 at
Revenue at $5 for 5000 maximum capacity (or
units = $25 000 profit at alternative
Fixed costs = $10 000 output)
Total cost at 2000 units Margin of safety
of output = $15 000 increases by 2000
Higher price will give Increased price leads
impression of higher to increased gross
quality product profit per unit however,
May increase profit revenue might not
increase if sales fall
Knowledge/Analysis/ Evaluation
Level 1 – 1 mark for each L1 statement (max of 3 marks), e.g. increasing the
price will lead to higher profit.
There may be other examples in context that have not been included here.
Award one mark for each difference (2 max) plus one additional mark for
explaining why it is a difference in context.
Indicative response:
MF has limited liability whereas an unincorporated business has unlimited
liability (1). This protects the shareholders of MF (1).
4(a)(ii) Identify and explain two differences between MF and public sector 4
organisations:
Award one mark for each difference (2 max) plus one additional mark for
explaining why it is a difference in context.
Indicative response:
MF has profit and increased market share as objectives whereas public sector
organisations will have different objectives such as public provision of a
service (1)
4(b) Consider the possible external costs and external benefits resulting 4
from MF’s new product. Recommend whether the Government should
encourage MF to produce this new product. Justify your answer.
External • Waste thrown into the landfill causes pollution for local
costs people – farmers lose some of their land – reduces locally
produced food – increased spending on buying food
• High cost to the government to clean up the waste – raise
taxes or reduce spending elsewhere
• Environmental damage when rainforest is cut down
Knowledge/Analysis/ Evaluation
4(b) Level 1 – 1 mark for each L1 statement (max of 3 marks), e.g. waste thrown
into the landfill causes pollution.
There may be other examples in context that have not been included here.