Mark scheme

1. MARKSCHEMEfor the May / June 2014 - 0450 BUSINESS STUDIES 0450/13
Paper
1 (a) What is meant by ‘paid by time rate’? [2]
e.g.receive asetamountof payfor everyhourworked
e.g.by the hour
(b) Calculate the following:[2]
(i) Spanof control forthe managingdirectoris4
(ii) Levelsinthe hierarchyis3
(c) Identifyand explaintwoadvantages to TPW of Tim’s democratic managementstyle.[4]
Relevantpointsmightinclude:•Createstime todo otherjobs as clerks/managerscanperform
some tasks • Lessmistakes/betterqualitywork asitwouldbe difficulttooversee the different
departments/helpTPWremainsuccessful•Retentionof workers asclerks/managersfeel partof
decisionmakingprocess •Betterdecisionmakingpossible asindividual managers/clerksare able
to contribute ideas •Bettercommunicationasmanagers/clerksknow thattheycanask questions
• Improves manager/workerrelationship. Note:benefitsmustbe forbusinessnotemployee
(d) Identifyand explaintwo methods(other than time rate) that TPW coulduse to reward its
employees.[6]
Relevantwaysmightinclude:•Bonusesforall workers office workers/clerkswouldwanttowork
harder[app] to getextra money;•Commissiontooffice team aswouldwantto attract more
clients[app] togetadditional payment•Performance relatedpay asworkersare paidin relation
to howwell theyhave done •Profitsharing as TPW believeindemocraticmanagementstyleso
everyone toshare equallyinbusinesssuccess;•Fringe benefits (onlyonce) suchascompany car
for businessmanagers ascar acts as signof status • Opportunitiesforpromotion soclerkshave
chance to become managers
(e) Do you think that introducingnew informationtechnologyin the office will helpimprove the
profitabilityofTPW? Justifyyour answer. [6]
Relevantpointsmightinclude:•High cost of installingtechnology whichwouldincrease fixed
costs • Highercosts of trainingand maintenance forITwhichcouldlowerprofitmargin •Help
provide abetterservice whichcouldhelpattractmore businesses •Quickerormore accurate
workis possible asmachinesare lesslikelytomake mistakes[an] infinancial calculations•Help
cut labourcosts as technologycouldreplace one (ormore) of the three workersinthe office •Risk
of joblossescouldaffect the motivationof employees soworkisslowerornotas accurate so
someone hastocheck accounts whichcouldcost more • More organised asable to find
documentsonline soable tocomplete workquicker

2. 2 (a) What is meant by ‘netcash flow’[2]
e.g.difference eachmonthbetweenthe cashinflowsandcashoutflows
e.g.showscash inand out
(b) Calculate [2]
X = (15000);
Y = 85000
Note 000s not requiredbutXmustbe shownas a negative value
(c) Identifyand explaintwopossible advantages to Karl of employingunskilledworkers.[4]
Relevantpointsmightinclude:•Larger pool of potential employees/easytoreplace sonot
expensive torecruitsomeone•Lowerwages so helpskeepcashoutflowslow•Quickerto findif
workis unskilled;employeesonlyselectingfabricsononeed topay forskilledworkers•Able to
keeppriceslow whichcanhelpattract more customers• Able tohire more workers so can keep
up withdemand
(d) Identifyand explaintwo possible advantagesto small businesscustomersof buying from a
wholesale businesssuchas Karl’s. [6]
Relevantpointsmightinclude:•Able tobuy amountneeded asall the small businesses mightnot
have moneyor space to store large amountsof stock • Accessto a varietyof materials ascan
easilychoose whichfabrics theywantwithouthavingtospendall theirtime travelling todifferent
manufacturers• Lowercosts of transport as wholesalerusuallypayfortransport• Loweroffice
costs as don’tneedtoemployateam of people todeal withmanyclothsuppliers •Lowerstorage
costs/lessneedto askeepingfabricscleanorundamaged mightneedtheyneedtopaymore for
saferstore • Immediate availability/convenience asKarl hasa large range of fabric instock [app]
so theycan alwaysgetthe materialsthattheyneed• May offercredit so can take materialsnow
and paylater [app] soimprove theircashflow
(e) Explaintwo ways that Karl could use to improve his cash flow. Recommendwhich one he
shoulduse. Justifyyour answer. [6]
Answerdependsonchoicesmade.Methodscouldinclude:•Delayingpaymenttocreditors as
woulddelaycashoutflowsuntil later•Delayingpaymentof wages asthiswouldpostpone cash
outflows•Arrangingan overdraftfacility wouldgive accesstocashimmediately •Disposal of
unwantedfixedassetswouldturnassetsintocash• Askdebtorstopay quicker as risen$20000 in
the 3 months thiswouldhelpimprove cashinflows•Reduce level of stock whichis 2/3 of outflows
inmonth 3 • Shortterm loan:banklikelytolend asbusinessisprofitable
Can accept practical examples,e.g.findcheapersupplier
Do not acceptanswerssuch as ‘increase cashinflow/reduce outflow’,increase sales,cutting costs,
raise pricesonown as toovague.
3 (a) What is meant by ‘break-evenlevel ofoutput’? [2]

3. e.g.pointat whichlevel of salesisthe same asthe total costs OR level of outputwhere business
makesneitheraprofitnora loss
e.g.costs same as sales
(b) Identifytwo factors whichcould influence employee’smotivationatABC. [2]
Factors include:•Recognitionandreward(e.g.financial factorssuchaslevel of payOR bonuses
OR employeeof monthawards) • Goodcommunication•Leadershipstyle •Opportunitiesfor
promotion• Interesting/variedwork• Job satisfaction•Social reasons/sense of belonging•
Security/protection,e.g.safe conditionsasworkingwithmachines
(c) Identifyand explaintwoeconomiesof scale that ABC could benefitfrom.[4]
Relevantpointsinclude:•Financial:alarge car manufacturerisseenaslessrisky• Technical:
increasingproductionby100000 whichallow expensivemachinestobe bought• Purchasing:
discountsforpurchasinglarge volumes of parts/materials•Managerial:able tohire specialist
productionmanagers• Marketing:can affordto advertise (cars) nationally/internationally
(d) Identifyand explaintwo possible problemsforABC ofincreasing production.[6]
Relevantpointsmight include:•needto hire more workerswhocan make cars so increase costs
[an] • (Additional)machinesmightbe needed asnotenoughequipmenttoproduce the additional
output• highermaintenancecosts:if machinesare usedmore theycouldbreakdownmore often
so needtospendmore keepingthemworking •(Additional) costsof training whichcouldincrease
the break-evenlevel beyond100000 • Lack of space at current site asneedto produce 100000
extracars so mightnot have roomto expandat thissite • Overworkcurrentworkers whichcould
lowertheirmotivationsohigherlabourturnover•Qualityissues asnotable tocheck all the cars
[app] whichcoulddamage reputation •Needto have higherlevelsof stock whichincreasescash
outflows •Possible diseconomiesof scale,e.g.poorcommunication
(e) Do you think it is a good idea for ABC to start exportingsome ofits cars? Justifyyour answer.
[6]
Relevantpointsmightinclude:•Increase salesaslargertarget market • Betterinternational
reputation •Lack of demandincountry X as have additional 100000 cars to sell • Spreadrisk so if
demandfallsinone countrycan make up salesinothers• Favourable exchange rates couldhelp
make ABC more competitivecouldhelpincrease the salesof the new car• Trade barriers could
meannot able to exportas many(any) cars • Governmentrestrictions mightneedtomodifythe
cars, whichcouldincrease costs/ price of vehicles) •Existingcompetition solittledemandinother
countries• Differentcustomerrequirements;peoplemightnotwantstyle of cars socannot sell
4 (a) What is meant by an ‘entrepreneur’?[2]
e.g. a personwhoorganises,operatesandtakesthe riskfora new businessventure.
e.g.identifiesqualitiessuchasrisktaker,initiative, goodmanagementskills,leader,decision
maker.
(b) Identifytwo methodsof promotion Frydays might use.[2]

4. Methodscouldinclude:advertisinginlocal papersORlocal television,leaflets,mailshotsto
customerbase,free foodsamples,discountvouchers,competitions.
(c) Identifyand explaintwofactors that would affectKyle’schoice of source of finance.[4]
Relevantpointsmightinclude:•Amountneeded he hassome savingsso mightnotneedmuch
money • What finance isneededforaswoulduse differentsourcesforbuyingingredientsorthe
shop• Timespantobuyingredientsislikelytobe shortterm/if to buy franchise –longterm sohe
needstodecide how• Financial status asjuststartingto trade he will nothave manyoptions•
Interestrates if high,likelytohave topay a lot if borrow $100000
(d) Identifyand explaintwo factors that Kyle should considerwhenchoosing a suitable location
for his business.[6]
Factors could include:•Demand/customers:enough people tohave sale/revenue •Costof renta
busycity centre locationwill costmore whichasnew cannotafford• Competition:if otherfast
foodbusinessesnearby customersmightbe loyal tothemsowill notchose Frydays• Guidelines
fromFrydays couldstate where restauranthasto be so haslittle choice •Access to right type of
employeesasneedstohire employees•Enoughspace as needssomewheretocookas well as
serve • Space forparkingso ease of access forfooddeliveries
(e) Do you think that owninga franchise wouldmean Kyle is ‘certain to make a profit?’Justify
your answer. [6]
Relevantpointsmightinclude:•Has to give royalties/share of profitstoFrydays solittle profitfor
himself •Lessriskthan sole traderso higherpossible sales/customersasitsleading name •Total
costs mightbe too high • Franchisorwill payforsome costs,e.g.promotion reducingKyle’sfixed
costs • Limitedinfluence overdecisions sonotable tomake choicesto increase salesenough •
Negative publicityaboutFrydays will affectall franchises sosalesandprofitscouldsufferthrough
no faultof Kyle • Customertastesmightchange sodemandforfast foodfalls • Actionsof
competitorssosalesmightfall •Business isnotguaranteedtosucceed if he choosesthe wrong
location;mightnotmake enoughsales/getcustomers
5 (a) Identifytwo featuresof an economicboom.
Pointsmightinclude:Lowunemployment,highGDP,risingbusinesssectorprofits,risingratesof
inflation, (possible) shortageof skilledworkers,businesscostsrising,higherdemand,higher
incomes.
(b) Identifytwo possible advantagesto mine workers of beingmembersofa trade union.[2]
Pointscouldinclude:negotiate forhigherwages,betterworkingconditions,improvedhealthand
safety,collective bargainingpower,advice,legal support,social benefits.
(c) Identifyand explaintwopossible advantages to GGC’smanagementof itsmine workersof
beingmembersof a trade union. [4]
Pointsmightinclude:•Disputescanbe solvedmore quickly sominingoperationsare notdelayed
• Helpagree changes, e.g.if unionagree tolongershiftsminersare likelytoacceptthe change •
No needtonegotiate withindividualworkers •Lesstime wastedinarguments somanagerscan

5. focuson importantmatters suchas makingjointventure work• Fewerindustrial disputes soable
to focuson itsotherobjectives•Improve GGC’sreputation soeasiertoattract employees
(d) Identifyand explaintwo sources of external finance that GGCmight use whensetting up a
new mine.[6]
Pointsmightinclude:•ShorttermloansOR overdraftas needtopay unexpectedvariablebills
such as fuel formachines•Long term bankloans: will needtobuylarge equipment,e.g.diggersso
have longtime to repay• Mortgages to pay forexpensive site •Leasing aswill needheavy
constructionequipment whichcouldneedtobe replacedregularly•Debentures•Government
grants as thismoney doesnotneedtobe repaid
Do not acceptbank loan
(e) Do you think it is a good idea for GGCto form a jointventure in country U? Justifyyour
answer [6]
Eitherviewpointisacceptable.Relevantpointsmightinclude:•Provide accesstonew markets
GGC hasno knowledge of countryUand itslawswhichcouldlimitwhere orhow much itcan mine
• Share costs so doesnot needtouse as many sourcesof finance asboth can contribute capital
/as there isa lot of competition the risksof failuremightbe higher•Accessto otherspecialist
staff and technology;GGCmightnotknow how to extractthe mineralsinU’sconditions sowould
needtohire people anyway •Share risks • Differentmanagementstylesorobjectives leadto
conflict/problemswithdecisionmaking •Skillsand expertise of partnersdiffer somighthave to
spendmore time/moneysettingupthe mine thanothercompany • Anymistakesmightdamage
reputationof bothfirms evenif GGC is not the cause of the error