0450 BUSINESS STUDIES - maxpapersmaxpapers.com/wp-content/uploads/2012/11/0450_m15_ms_qp...deciding whether to export its products? Justify your choices. [6] Knowledge [1] – award

® IGCSE is the registered trademark of Cambridge International Examinations.

CAMBRIDGE INTERNATIONAL EXAMINATIONS

Cambridge International General Certificate of Secondary Education

MARK SCHEME for the March 2015 series

0450 BUSINESS STUDIES

0450/12 Paper 1 (Short Answer/Structured Response), maximum raw mark 80

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 March 2015 series for most Cambridge IGCSE

®

components.

Page 2 Mark Scheme Syllabus Paper

Cambridge IGCSE – March 2015 0450 12

© Cambridge International Examinations 2015

General Marking Guidance 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) Draw the monthly total cost line on Figure 1. [2] Application [2×1] Accurately plotted TC must start at $250 000[1]; at 10 000 units should at $500 000 [1].

(b) Use the chart to calculate the monthly profit if Burnett produces and sells 20 000 pairs

of shoes. [2] Application [2] e.g. correct answer $250 000 Some application [1] e.g. use of formula OR 1 000 000 – 750 000 Note: own figure rule (OFR) can apply if workings based on answer to part (a) Do not credit calculation of total revenue on its own

(c) Identify and explain two possible economies of scale that Burnett could benefit from.

[4]

Knowledge [2×1] – award 1 mark per economy of scale identified Application [2×1] – award 1 mark for each relevant explanation (i.e. show how economy of scale comes about for a manufacturer). Points might include: • Technical / invest large amounts in R&D [k] as costs spread over more shoes [app] • Marketing [k] cost of advertising spread over more products, so cheaper per pair [app] • Risk bearing [k] as able to operate in more than one country so if there are problems in

one market, they have others to rely on [app] • Managerial [k] as can afford to hire managers who know about exporting [app] • Purchasing/able to buy in bulk [k] as get discounts for increased order of materials [app] • Financial [k] as easier for large manufacturer to access more sources of finance as seen

as lower risk [app] (d) Identify and explain two ways in which break-even charts can be useful to the

Operations Director of Burnett. [6] Knowledge [2×1] –award 1 mark for each relevant point identified [max 2] Application [2×1] – award 1 mark if relevant reference made to Burnett’s business Analysis [2×1] – award 1 mark for each relevant explanation Relevant points might include: • Shows the expected level of profit / loss at different levels of output [k] so will show

whether profitable to expand [app] • Shows the margin of safety [k] so know even if they do not hit the target they could still

make a profit [an] as long as sell over 10 000 pairs [app] • Helps planning [k] to estimate the sales needed to be made to cover all the costs [an] so

that he can order the right amount of materials [app] • Able to see what will happen to the break-even point if costs or prices change [k] to work

out what the best level of output to work at [app]




(e) Which do you think are the two most important factors for Burnett to consider when deciding whether to export its products? Justify your choices. [6] Knowledge [1] – award 1 mark for identification of relevant factor(s) [max 1] Application [1] – award 1 mark if relevant reference made to Burnett’s business Analysis [2] – award up to 2 marks for relevant development of point(s) Evaluation [2] – justified decision made as to why each one is an important factor for Burnett to consider Relevant points might include:

• Foreign competition [k] • Size of overseas market [k] might be limited demand for the sports shoes they make for

[app] • Quality standards abroad [k] could means that have to change how they make the shoes

[app] leading to additional production costs [an] • Transport costs [k] as higher costs could increase break even output [app] • Barriers to trade [k] so not able to export as many products as want [an] • Currency fluctuations/exchange rates [k] as appreciation of own currency could make

shoes more expensive in another country [app] leading to no/fewer customers [an] • Risk of non-payment by customers overseas [k] • Different tastes and customs [k] so customers might like the leather used[app] Application marks may be awarded for appropriate use of the following: feet sizes, shoes or associated words such as leather, fabric, sports played; extra output, exporting for first time, correct use of numbers e.g. planned sales 20 000 Do not accept references to opening shops, as this is a manufacturer

2 (a) What is meant by ‘dismissal’? [2]

Clear understanding [2]: e.g. whether worker told to leave their job [1] because their work or behaviour is unsatisfactory Some understanding [1]: made to leave job Do not accept ‘fired’, ‘dismissed’ or ‘sacked’ on own as it does not explain the term

(b) Identify two advantages to Zoff of using internal recruitment for the new Managing

Director. [2] Application [2×1] award 1 mark per advantage Points might include: • Already know how business operates • Saves time / money on recruitment process • Business already know the qualities / abilities of candidates • Motivate other employees




(c) Identify and explain two ways (other than improving quality) that Zoff could use to improve its competitiveness. [4] Knowledge [2×1] – award 1 mark for each way identified Application [2×1] – award 1 mark for each relevant explanation Points might include: • Lower prices / use competitive pricing [k] as more customers might be able to afford their

washing machines [app] • Offer after sales services [k] such as free bike service so that customers are tempted to

choose their products over rivals [app] • Create new products / features [k] so even wider range of products to appeal to more

customer [app] • Target your product / marketing more effectively [k] • Improve relations with suppliers [k] so able to get parts more quickly [app] • Lower unit cost / reduce waste / improve productivity [k]

(d) Identify and explain two ways in which Zoff might achieve quality production. [6]

Knowledge [2 × 1] –award one mark for each relevant way identified [max 2] Application [2 × 1] – award 1 mark if relevant reference made to manufacturer like Zoff Analysis [2 × 1] – award 1 mark for each relevant explanation Relevant points might include: • Quality control [k] by checking products before they leave the factory [app] they know

there are no errors [an] • Train employees [k] so able to complete tasks with less errors [an] so able to produce

better bicycles / washing machines [app] • Update / better machinery [k] • Introduce TQM system / quality circle / Kaizen [k] • Use better quality materials [k]

Note: can accept quality assurance or practical examples Do not accept reference to production as application as stated in question Do not accept lean production, more machinery / capital intensive, use flow production as does not necessarily relate to better quality

(e) Do you think Zoff should change its objectives? Justify your answer. [6]

Knowledge [1] – award 1 mark for identification of point (s) [max 1] Application [1] – award 1 mark if relevant reference made to Zoff’s business Analysis [2] – award up to 2 marks for relevant development of point(s) Evaluation [2] – justified decision made as to whether Zoff should change its objectives. Either viewpoint is acceptable Relevant points might include: • Increase in competition [k] might not be scope to continue to grow [app] • Achieved its growth plan [k] so need to have new objectives • Poor management [k] MD was dismissed [app] could suggest poor decisions were taken

[an]




• Different people have different objectives [k] new MD might have different goals [app] • Financial issues [k] as profits falling [app] so might not have the funds to continue

expansion [an] • Improved reputation [k] so customers might be attracted to better quality [app] leading to

higher sales [an]

Application marks may be awarded for appropriate use of the following: falling profits, wide range of products, MD dismissal, rapid growth, large manufacturer, bicycles / washing machines

3 (a) What is meant by ‘internal communication’? [2] Good knowledge [2] – messages between employees [1] working in same organisation [1] Some knowledge [1] – e.g. communication inside a business For both marks must have idea of who between and where occurs

(b) Identify two barriers to communication. [2]

Knowledge [2×1] award one mark per barrier Points could include: Language / jargon not understood, no feedback, wrong channel, technical breakdown, distance / time involved, too many layers to go through

(c) Identify and explain two advantages to Kapil of using information technology. [4]

Knowledge [2×1] – award 1 mark for each relevant advantage [max 2] Application [2×1] – award 1 mark for each relevant explanation Points might include: • Emails can be sent out quickly [k] so always have information ready for meetings [app] • Save variable costs [k] as less paper needed when writing out contracts [app] • Better security [k] as sensitive / important documents less likely to be left around office

for anyone to see [app] • Save space [k] as legal documents can be stored on the computer rather than in filing

drawers [app] • Reduce barriers to communication [k] • Way to advertise [k]

(d) Identify and explain two suitable sources of finance that Kapil could use to purchase

the new IT system. [6] Knowledge [2×1] – award 1 mark for each suitable source identified [max 2] Application [2×1] – award 1 mark if relevant reference made to Kapil Analysis [2×1] – award 1 mark for each relevant explanation (i.e. how or why suitable) Points might include: • Loan [k] as able to spread repayments over long time [an] so avoid increasing fixed

costs by too much [app]




• Lease [k] so easier to keep up to date [an] as new software / equipment becomes available [app]

• Profits [k] as its successful [app] should have funds readily available/ no need to increase costs [an]

• Sell off existing assets [k] as it will not increase debts of business [an] • Hire Purchase [k] as no need to find a large cash sum to buy it [an]

Do not accept bank overdraft or other short-term options. Note: references to new IT system is not application as it is stated in question

(e) Do you think Kapil should move to a cheaper location? Justify your answer. [6] Knowledge [1] – award 1 mark for identification of relevant issue(s) [max 1] Application [1] – award 1 mark if relevant reference made to Kapil’s business Analysis [2] – award up to 2 marks for relevant development of point(s) Evaluation [2] – justified decision as to whether Kapil should move to a cheaper location Points might include: • Near to customers [k] as more businesses likely to be located in city centre [app]

otherwise might lose out to competitors [an]; • Availability of suitable workers [k] as lawyers are specialists [app] they need to ensure

they can get the right people [an]; • Status / image [k] as a central location [app] will help them attract potential customers

[an] • Cost of rent [k] likely to be higher in city centre [app] • Need to reduce costs [k] as worried about high fixed costs [app] • Importance of location to business [k] as could replace meetings with new technology

[app]

Application marks may be awarded for appropriate use of the following: high fixed costs, successful, good location, range of services, meetings, legal advice

4 (a) What is meant by ‘micro-finance’? [2]

Clear understanding [2]: e.g. provides financial services, including small loans, to poor people not served by traditional banks Some understanding [1]: e.g. identifies a feature such as not given by big banks / help people who can’t afford a loan Do not accept money to start up as this could apply to many sources of finance or grants

(b) Identify two reasons why the Government might support business start-ups. [2]

Knowledge [2×1] award 1 mark per reason Points could include: • Reduce unemployment • Increase competition / develop market • Increase output / economic growth • Generate new ideas • Can become large / important businesses in future • Source of tax




(c) Identify and explain two ways in which legal controls might affect Gowri’s business. [4]

Knowledge [2×1] – award 1 mark way identified Application [2×1] – award 1 mark for each relevant explanation Points might include: • Influence how advertises [k] as must avoid misleading people about leather products

[app] • Ensure fit for purpose [k] could be sued / forced to pay compensation if use faulty or

dangerous materials [app] • Increase costs / time [k] as must make sure where bags are made it is safe to work in

[app] • Employment controls e.g. Minimum wages [k] could increase costs for a new business

[app] • Location / planning controls [k] as might not be able to produce things in some places

[app]

Do not accept shop as application – makes bags (d) Identify and explain two factors (other than legal controls) that Gowri needs to

consider when deciding on which method of promotion to use for her products. [6] Knowledge [2×1] –award one mark for each factor identified [max 2] Application [2×1] – award 1 mark if relevant reference made to Gowri’s business Analysis [2×1] – award 1 mark for each relevant explanation Relevant points might include: • Purpose [k] whether she wants to inform about or attract customers [an] to buy her

leather goods [app] • Budget /cost [k] as looked at micro finance [app] so unlikely to have much to spend on

promotion [an]; • Who is target market [k] needs to choose a way to attract the right customers [an] such

as women for bags / belts for men or women [app]; • Stage in product life cycle [k] as new business [app] will want to raise awareness of her

products [app] Do not accept answers that focus on identifying methods to use as this does not answer question




(e) Do you think it would be better for Gowri to have a business partner rather than be a sole trader? 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 Gowri’s business Analysis [2] – award up to 2 marks for relevant development of point(s) Evaluation [2] – justified decision made as to whether Gowri would be better with a business partner Relevant points might include: • Keeps all the profit [k] so if successful she will make more money [an] • Total control if sole trader [k] always wanted to start her own business [app] • Aware of what she needs to do [k] as identified finance, marketing as areas [app] • Partner will still mean unlimited liability [k]so could still lose her personal assets if

business does not work [an] • Partner could bring in more skills [k] as Gowri might lack experience [app] • Unlimited liability [k] could help share risk for Gowri [an] • Additional funds [k] so might not need microfinance [app] so able to spend more on

creating interest [an] • Possible Conflict / arguments [k] • Share work / ideas [k] so able to create / make more goods [app] leading to more

revenue [an]

Application marks may be awarded for appropriate use of the following: ‘lot to do’ new start up, microfinance, bags or associated words such as leather, sewing; government help, own business Note: Candidate’s final decision can be either for or against the statement.

® IGCSE is the registered trademark of Cambridge International Examinations.

CAMBRIDGE INTERNATIONAL EXAMINATIONS

Cambridge International General Certificate of Secondary Education

MARK SCHEME for the March 2015 series

0450 BUSINESS STUDIES

0450/22 Paper 2 (Case Study), maximum raw mark 80

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 March 2015 series for most Cambridge IGCSE

®

components.




General Marking Guidance 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 ways that LH could increase the added value of its products. [8] Knowledge [2 × 1] – award one mark for each relevant way Analysis [2 × 1] – award one mark for a relevant explanation for each way Application [2 × 2] – award two application marks for each way Relevant points might include: Award one mark for each relevant way (maximum of two), such as: • Increase the price of the product • Reduce the cost of raw materials Award up to two additional marks for application plus one additional mark for explanation of each of these ways. Indicative response: Reduce the cost of raw materials [k] as Vijay can buy metal or wire for a cheaper price [app] and then the difference between the cost price and selling price will be higher [an]. This will mean that the added value for each lamp will be higher [app]

Possible application marks: partnership; three brothers; lamps; products sold for high prices; high quality products; manufacturing cost; distributed through independent retail shops; purchased by home owners and hotels; e-commerce; building good customer relationships; unskilled workers; labour-intensive; wire, cloth and wood. There may be other examples in context which have not been included here.




(b) Consider the advantages and disadvantages of the following three ways Vijay could use to increase efficiency of the business. Recommend the best way to use. Justify your answer. [12]

Relevant points might include:

Advantages Disadvantages

Increase the skills of the existing employees

Increase the output per worker No need to raise finance to purchase automated equipment

Cost of training Loss of output whilst training

Purchase automated equipment

Reduced wages as labour reduced Increased total output Reduced unit labour cost

Cost of purchasing the machinery Redundancy payment Labour unrest from redundancy

Introduce lean production

Reduce waste Reduced storage costs Reduced cash outflows from inventory purchases

Cost of introducing lean production Difficult to change to JIT Needs reliable suppliers

Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.

Knowledge/Analysis/ Evaluation

Level 3

At least 2 × Level 2 + 9–10 marks for well justified recommendation as to the best way to increase efficiency compared to the other ways. 7–8 marks for some limited judgement shown in recommendation as to the best way to increase efficiency.

Level 2 4–6 marks Detailed discussion of the advantages and /or disadvantages of the three ways to increase efficiency.

Level 1 1–3 marks Outline of the advantages and/or disadvantages of the three ways to increase efficiency.

Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. highly trained workers will produce more output per worker. 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. Highly trained workers will produce more output per worker which will reduce the cost per unit of output. This will reduce the costs of producing each lamp and therefore the price can be reduced which will lead to higher sales supplied by this increased output. (4 marks for L2 answer + 1 application mark for mentioning lamps).




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 increase efficiency. Award up to 2 additional marks for relevant application.

Possible application marks: partnership; three brothers; invested $20 000; lamps; business only two years old; building good customer relationships; high quality of existing products; unskilled/not well trained workers; batch production; labour-intensive; $95 000; Operations manager; recruited externally; financial information from appendix 3; minimum wage paid per hour; jobs are boring; 50 workers in the factory; needs external finance; motivated / demotivated workers; workers doing the same job every day; workers getting injured in factory; working conditions not good; wire, cloth and wood. There may be other examples in context which have not been included here.

2 (a) Identify and explain four stages in the recruitment process for the Operations manager that Vijay should use. [8] Knowledge [4 × 1] – award one mark for each stage Application [4 × 1] – award one application mark for each stage Award one mark for each stage (maximum of four), such as: • Job analysis • Job description • Job specification • Job advertisement • Review applications/shortlisting • interview Award a maximum of one additional mark for an applied explanation of each stage. Indicative response: Job specification [k] will need to list all the necessary skills, experience or qualifications required by the manager such as previous experience working in a lamp manufacturing business [app].

Possible application marks: lamps; e-commerce; unskilled workers; batch production; labour-intensive; purchased automated equipment; recruited externally; experience of manufacturing; advertising in newspapers / magazines; CV on internet; recruitment agencies; motivating workers; wire, cloth and wood. There may be other examples in context which have not been included here.




(b) Vijay wants to make sure he has well motivated employees. Consider the advantages and disadvantages of the following three ways he could use. Recommend the best one to choose. Justify your answer. [12]



Introduce piece rate

Increased output leads to higher pay and so the workers work harder

Higher wage costs Quality standards may be reduced

Use job enrichment

Makes the job more interesting Lower labour turnover

May not be very easy to increase the number of tasks for a job Some tasks may not be carried out effectively

Improve working conditions in the factory

Reduce the number of accidents Reduce days lost through accidents Make employees feel valued/increase morale

Increased cost Cost of providing safety equipment



Level 3

At least 2 × Level 2 + 9–10 marks for well justified recommendation as to the best way to motivate employees compared to the other ways. 7–8 marks for some limited judgement shown in recommendation as to the best way to motivate employees.

Level 2 4–6 marks Detailed discussion of advantages and/or disadvantages of each way.

Level 1 1–3 marks Outline of advantages and/or disadvantages of each way

Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Introduction of piece rate will encourage the workers to work harder to gain more pay. 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. Introduction of piece rate will encourage the workers to work harder to gain more pay. Higher output will lead to higher profit for Vijay as the higher wages will be less than the value of the increased output. However, the quality of the lamps might be reduced as workers rush to produce a higher output. (4 marks for L2 answer + 1 application mark for mentioning lamps).




Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation which justifies the best way to increase motivation. Award up to 2 additional marks for relevant application.

Possible application marks: partnership; three brothers; lamps; business only two years old; building good customer relationships; unskilled workers; batch production; labour-intensive; purchased automated equipment; country X; financial information from appendix 3; minimum wage paid per hour; jobs are boring; quality products; wire, wood & cloth; wire, cloth and wood. There may be other examples in context which have not been included here.

3 (a) Vijay is considering using e-commerce to sell LH’s products. Identify and explain two

advantages and two disadvantages to LH of using e-commerce. [8] Knowledge [4 × 1] – award one mark for each relevant advantage/disadvantage Application [4 × 1] – award one application mark for each advantage/disadvantage Award one mark for each advantage/disadvantage (maximum of four), such as: • Increased potential number of customers/sales • Increased target market • Higher distribution costs • Cost of breakages in post • Cost of maintaining website • Lack of personal service Award a maximum of one additional mark for each applied explanation of the advantage/disadvantage. Indicative response: Higher potential number of customers [k] as more people from many countries other than country X will see the website and may buy a lamp [app].

Possible application marks: partnership; three brothers; invested $20 000; lamps; business only two years old; distributed through independent retail shops; purchased by home owners and hotels; building good customer relationships; country X; financial information from appendix 3; fragile products; wire, cloth and wood. There may be other examples in context which have not been included here.




(b) Consider the following three ways Vijay could use in his business to build good customer relationships. Recommend which would be the best way to use. Justify your answer. [12]



Providing good customer service

Makes customers feel important Build a good reputation Repeat customers

Increased cost of training staff Increased cost

Carrying out market research

Results help to ensure customer needs are met Gathers customer information Helps to inform on pricing strategy

Cost of carrying out research Time consuming Results can be inaccurate

Creating customer loyalty schemes

Encourages customers to keep returning

Administration costs of setting them up and sending out coupons Limited repeat purchases



Level 3

At least 2 × Level 2 + 9–10 marks for well justified recommendation as to the best way to build good customer relationships compared to the other ways. 7–8 marks for some limited judgement shown in recommendation as to the best way to build good customer relationships.

Level 2 4–6 marks Detailed discussion of advantages and/or disadvantages of each way to maintain good customer relationships.

Level 1 1–3 marks Outline of advantages and/or disadvantages of each way to maintain good customer relationships.

Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. good customer service makes customers feel valued. Level 2 – one L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 8 marks) e.g. Good customer service makes customers feel valued and their needs will be met by the business. This will encourage the customers to keep returning to buy from Vijay and become loyal customers. (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 best way to choose. Award up to 2 additional marks for relevant application.

Possible application marks: partnership; three brother; lamps; quality products; business only two years old; distributed through independent retail shops; purchased by home owners and hotels; e-commerce; unskilled workers; batch production; country X; financial information from appendix 3; wire, cloth and wood. There may be other examples in context which have not been included here.

4 (a) The Government in country X is planning to reduce income tax but also increase

interest rates. Identify and explain how each of these changes is likely to affect LH. [8] Knowledge [2 × 1] – award one mark for each relevant effect Analysis [2 × 1] – award one mark for a relevant explanation of each effect Application [2 × 2] – award two application marks for each effect Award one mark for each relevant effect (maximum of two) – Reduce income tax – higher disposable income – increased demand – increased sales – increased profit Increase interest rates – higher cost of borrowing – less likely to invest – greater return needed from an investment to make it worthwhile Award up to two additional marks for application plus one additional mark for explanation of each of these effects. Indicative response: Reduced income tax leads to customers having higher disposable income as they will pay less income tax [k]. They will be able to increase the demand for lamps [app] as they have more money to improve their homes [app]. This will mean Vijay has an increase in sales which will further increase his profits [an]

Possible application marks: Partnership; three brothers; lamps; business only two years old; purchased by home owners and hotels; e-commerce; unskilled workers; batch production; labour-intensive; purchased automated equipment; $95 000; financial information from appendix 3; high quality products; business expansion; already has bank loans; introduce lean production; wire, cloth and wood. There may be other examples in context which have not been included here.




(b) Refer to Appendix 3. Do you think Vijay should be happy with the financial position of LH? You should include liquidity ratios to help justify your answer. [12] Relevant points might include: 2013 Current ratio – 1 Acid test ratio – 0.6 2014 Current ratio – 0.67 Acid test ratio – 0.5 Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.


Level 3

7–10 marks 2 × L2 correct calculations plus evaluation of the calculations leading to a well justified conclusion as to whether Vijay should be happy with the financial position of the business.

Level 2 4–6 marks Detailed discussion of the financial position correctly calculating liquidity ratios.

Level 1 1–3 marks Outline of the financial position of the business.

Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. the amount of inventories held have gone down by 5 000. Level 2 – one L2 calculation can gain 4 marks and a further mark can be awarded for each additional L2 calculation (max 6 marks) e.g. The acid test for Year 2 is 0.5. (4 marks for L2 answer) Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded for calculations plus evaluation of the calculations leading to a conclusion which justifies whether he should be happy with the financial position. Award up to 2 additional marks for relevant application.

Possible application marks: partnership; three brothers; invested $20 000 each; lamps; business only two years old; distributed through independent retail shops; purchased by home owners and hotels; e-commerce; purchased automated equipment; $95 000; country X; financial information from appendix 3; quoted extracts from financial information from appendix 3; quality products; wire, cloth and wood. There may be other examples in context which have not been included here.

This document consists of 10 printed pages and 2 blank pages.

DC (ST/FD) 97473/4© UCLES 2015 [Turn over

Cambridge International ExaminationsCambridge International General Certificate of Secondary Education

*4384196238*

BUSINESS STUDIES 0450/12

Paper 1 February/March 2015

1 hour 30 minutes

Candidates answer on the Question Paper.

No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

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.

Answer all questions.The businesses described in this question paper are entirely fictitious.

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.

2

0450/12/F/M/15© UCLES 2015

1 Burnett manufactures a range of sports shoes. The Operations Director is planning to increase the scale of production at its factory. She hopes it could lead to more than one economy of scale. The extra output would allow Burnett to export its shoes for the first time.

Table 1: Costs and revenue for current production levels

Fixed costs per month $250 000

Labour costs per pair of shoes $15

Material costs per pair of shoes $10

Average selling price per pair of shoes $50

Planned sales per month (pairs of shoes) 20 000

20 00

0

15 00

0

10 00

050

00

TR

FC

100 000150 000200 000250 000300 000350 000400 000450 000500 000550 000600 000650 000700 000750 000800 000850 000900 000950 000

1 000 000

50 000

0

output (pairs of shoes)

costs andrevenue

$

Figure 1

(a) Draw the monthly total cost line on Figure 1. [2]

(b) Use the chart to calculate the monthly profit if Burnett produces and sells 20 000 pairs of shoes.

...................................................................................................................................................

...............................................................................................................................................[2]

3

0450/12/F/M/15© UCLES 2015 [Turn over

(c) Identify and explain two possible economies of scale that Burnett could benefit from.

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(d) Identify and explain two ways in which break-even charts can be useful to the Operations Director of Burnett.

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(e) Which do you think are the two most important factors for Burnett to consider when deciding whether to export its products? Justify your choices.

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0450/12/F/M/15© UCLES 2015

2 Zoff is a large engineering company. It manufactures a wide range of products from bicycles to washing machines, mainly using batch production methods. The company has grown rapidly but its profits are falling. Following the dismissal of the Managing Director, the company has announced that a new Managing Director will be recruited internally. A spokesperson said: ‘Our objectives have to change. Rather than growth, we will focus on improving quality whilst at the same time try to improve our competitiveness.’

(a) What is meant by ‘dismissal’?

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(b) Identify two advantages to Zoff of using internal recruitment for the new Managing Director.

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(c) Identify and explain two ways (other than improving quality) that Zoff could use to improve its competitiveness.

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(d) Identify and explain two ways in which Zoff might achieve quality production.

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(e) Do you think Zoff should change its objectives? Justify your answer.

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0450/12/F/M/15© UCLES 2015

3 Kapil is a successful law partnership in the centre of a large city. It offers a range of services to small and large business customers, including having meetings to give legal advice and writing contracts. Kapil’s Finance manager is worried about the high level of fixed costs. He believes this is due to Kapil’s good location. The Managing Director wants to buy a new information technology (IT) system to help improve internal communication. She thinks technology will help remove some communication barriers.

(a) What is meant by ‘internal communication’?

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(b) Identify two barriers to communication.

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(c) Identify and explain two advantages to Kapil of using information technology.

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(d) Identify and explain two suitable sources of finance that Kapil could use to purchase the new IT system.

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(e) Do you think Kapil should move to a cheaper location? Justify your answer.

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0450/12/F/M/15© UCLES 2015

4 Gowri has always wanted to start up her own business making leather goods such as bags and belts. She has already asked about micro-finance and what help the Government will offer new business start-ups. ‘There is still a lot to do!’ said Gowri. ‘I need to plan my sales promotion and find out about how legal controls could affect my business.’ Gowri is not sure if she needs a business partner.

(a) What is meant by ‘micro-finance’?

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(b) Identify two reasons why the Government might support business start-ups.

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(c) Identify and explain two ways in which legal controls might affect Gowri’s business.

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0450/12/F/M/15© UCLES 2015

(d) Identify and explain two factors (other than legal controls) that Gowri needs to consider when deciding on which method of promotion to use for her products.

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(e) Do you think it would be better for Gowri to have a business partner rather than be a sole trader? Justify your answer.

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0450/12/F/M/15© UCLES 2015

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.

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