2022 Igcse Business Revision Pack Past Papers

MOCK EXAMS
PAST PAPERS
IGCSE BUSINESS
C2022
1
Cambridge International Examinations
Cambridge International General Certificate of Secondary Education
BUSINESS STUDIES 0450/11

*7197256577*
Paper 1 October/November 2017

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.
This document consists of 9 printed pages and 3 blank pages.
11_0450_11_2017_1.8
© UCLES 2017 [Turn over
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1 Ella has just left college and wants to start up her own business. She has designed a new bicycle
light with a safety feature not found in any rival products. Ella knows obtaining finance will be difficult.
She plans to have the lights produced in another country. Each light will cost $8 to produce. Ella
cannot decide whether to use price skimming. She said: ‘I have received orders for 300 lights and
I have not even started promoting them’. Ella wants to be a successful entrepreneur.
Table 1: Information on possible promotion options for Ella’s bicycle light.
Option 1: Set up her own website Option 2: Advertise in specialist

magazine
Cost information $500 for web page to show product $300 for full page colour
specifications and contact details advertisement
Other information For extra $750 website would allow One of the most popular cycling
customers to order online magazines in the country.
(a) Identify two characteristics of a successful entrepreneur.
Characteristic 1:.................................................................................................................
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Characteristic 2:.................................................................................................................
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(b) Identify two possible reasons why Ella plans to produce the lights in another country.
Reason 1:..........................................................................................................................
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Reason 2:..........................................................................................................................
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(c) Identify and explain two reasons why obtaining finance might be difficult for Ella’s business.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain one advantage and one disadvantage to Ella of using price skimming.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Recommend which promotion option Ella should choose. Justify your answer using the
information in Table 1.
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2 NMBJ makes a range of cookies (biscuits) using batch production. Last year profit increased by
$1.5 million. The directors think this is because of an increase in productivity and better management
of working capital. NMBJ has a low level of inventory. NMBJ plans to increase the wages of all 300
employees by $50 per month from March. The Finance Director is worried: ‘This decision will add
$15 000 to wages each month. Many employees are leaving. Is paying higher wages the best way
to improve motivation?’
Table 2: Cash flow forecast for the period January - March 2018 ($ 000)
January February March
Cash inflow 560 520 600
Cash outflows:
Wages 60 60 X
Other costs 500 480 520
Total cash outflows 560 540 595
Net cash flow 0 (20) Y
Opening balance 5 W (15)
Closing balance 5 (15) Z
(a) What is meant by ‘productivity’?
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(b) Identify two reasons why a business might need working capital.
Reason 1:..........................................................................................................................
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Reason 2:..........................................................................................................................
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(c) Calculate the following values shown on the cash flow forecast.
W : ......................................................................................................................................
X : .......................................................................................................................................
Y : .......................................................................................................................................
Z : ....................................................................................................................................... [4]
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(d) Identify and explain one advantage and one disadvantage to NMBJ of having a low level of
inventory.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think paying higher wages is the best way for NMBJ to improve employee motivation?
Justify your answer.
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3 GDC is a transport delivery business in country Z. It operates in a competitive market. GDC has
5000 employees and 1000 delivery vehicles. GDC’s organisational structure has many levels of
hierarchy with a long chain of command. The managers use an autocratic leadership style. Last
year GDC delivered 2 billion parcels for businesses. The Managing Director said: ‘Having a good
reputation is important. We have also benefited from economies of scale’. GDC wants to expand
its operations to another country, but cannot decide the best way to do this.
(a) What is meant by ‘economies of scale’?
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(b) What is meant by ‘autocratic leadership style’?
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(c) Identify and explain one advantage and one disadvantage of GDC’s organisational structure.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two reasons why a good reputation might be important to GDC.
Reason 1:..........................................................................................................................
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Explanation:.......................................................................................................................
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Reason 2:..........................................................................................................................
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Explanation:.......................................................................................................................
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(e) Recommend the most suitable way for GDC to expand its business to another country. Justify
your answer.
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4 CHONS is a public limited company. The directors want to open a new coal mine. All the coal will
be exported. The Managing Director is hopeful that the Government will allow the coal mine to be
opened. She said: ‘CHONS always meets legal controls. In an area of high unemployment surely
creating jobs is more important than protecting the environment. Most stakeholder groups including
shareholders and suppliers are happy. CHONS will not be asking for any Government support.’
Table 3: Information about the proposed coal mine
Planned output 50m tonnes per year
Number of years coal mine will operate 60 years
Jobs created 10 000
Level of waste products causing pollution High
Risk of traffic problems High
(a) What is meant by a ‘stakeholder group’?
...........................................................................................................................................
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(b) Identify two ways (other than legal controls) that a government might use to influence business
decisions.
Way 1:................................................................................................................................
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Way 2:................................................................................................................................
........................................................................................................................................... [2]
(c) Identify and explain one advantage and one disadvantage of CHONS being a public limited
company.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(d) Identify and explain two ways in which legal controls might affect CHONS.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think the Government should allow CHONS to open the coal mine? Justify your answer
using the information in Table 3.
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*8014975208*

1 hour 30 minutes


11_0450_12_2017_1.8
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1 FlyAway is an airline business. It is in the tertiary sector. It offers low-price flights for business
customers in country J. Customers have to pay extra for luggage and food on the flight. It is a very
competitive market. The Marketing manager knows that improving customer service is important.
Bookings and advertising are done through FlyAway’s ticket shops and its website. The Marketing
manager cannot decide whether to close its ticket shops and use only e-commerce.
Table 1: Selected information about two of FlyAway’s routes
Route Average number of Average price per ticket Break-even number of

passengers per flight ($) passengers per flight
1 85 80 70
2 110 60 90
(a) What is meant by ‘tertiary sector’?
...........................................................................................................................................
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(b) Calculate the revenue gained from an average flight on route 2.
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(c) Identify and explain two ways in which break-even information could help FlyAway.
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 two ways in which FlyAway could improve customer service.
Way 1:................................................................................................................................
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Explanation:.......................................................................................................................
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Way 2:................................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think FlyAway should use only e-commerce? Justify your answer.
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2 CGM makes high quality shoes using job production. The production method makes use of
specialisation. CGM operates in a niche market. CGM managers know that all business activity
creates external costs, so they always try to act in ways that protect the environment. The Operations
Director wants to increase profit. CGM could either buy cheaper raw materials or introduce new
technology into the production process. The new technology would cost $30 000 and could reduce
the number of employees from 30 to 26.
(a) Identify two advantages of specialisation.
Advantage 1:.....................................................................................................................
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Advantage 2:.....................................................................................................................
........................................................................................................................................... [2]
(b) What is meant by ‘external cost’?
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(c) Identify and explain two ways in which CGM could try to protect the environment.
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 one advantage and one disadvantage to CGM of using job production.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think CGM should introduce new technology into the production process? Justify your
answer.
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3 Yanis owns a busy restaurant in the city centre. He employs 4 skilled chefs and 6 workers to serve
in the restaurant. All employees are on part-time contracts. The chefs are paid a high hourly wage
rate, but receive no bonuses. Yanis is worried that too many chefs leave. He is thinking of other
ways in which he could motivate the chefs. Yanis wants to open another restaurant but is worried
about problems linked to growth. He has prepared a balance sheet as part of his business plan.
An extract is shown in Table 2. The current ratio was 1.2:1 in 2016.
Table 2: Extract from balance sheet as at 30 September 2017 ($ 000)
Non-current assets 160
Current assets 60
Current liabilities 40
Non-current liabilities 120
(a) Identify two main parts (other than finance) of a business plan.
Part 1:................................................................................................................................
Part 2:................................................................................................................................ [2]
(b) What is meant by ‘non-current assets’?
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(c) (i) Calculate the current ratio as at 30 September 2017.
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(ii) Explain what the two current ratio results show about Yanis’s business.
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(d) Identify two possible problems for Yanis if he expands his business. Explain what he might
do to overcome each problem.
Problem 1:.........................................................................................................................
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Explanation of how to overcome the problem:..................................................................
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Problem 2:.........................................................................................................................
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Explanation of how to overcome the problem:..................................................................
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(e) Do you think Yanis should change the way he motivates his chefs? Justify your answer.
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4 VIS provides a range of insurance services including insurance for cars and electrical products.
Last year retained profit decreased. The Managing Director blames higher taxation and also thinks
that some markets have become more competitive. Customer complaints have also increased.
The Managing Director plans to change the business organisational structure by removing both
the regional directors and regional managers. She said: ‘Shorter chains of command may help. I
know some employees may need training.' She cannot decide on a suitable method of
communication to inform employees about the changes to the organisational structure.
(a) Identify two reasons why markets can become more competitive.
Reason 1:..........................................................................................................................
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Reason 2:..........................................................................................................................
........................................................................................................................................... [2]
(b) Identify two methods of training that a business might use.
Method 1:...........................................................................................................................
Method 2:........................................................................................................................... [2]
(c) Identify and explain two ways in which higher taxation might affect VIS.
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 two advantages to VIS of changing its organisational structure.
Advantage 1:.....................................................................................................................
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Explanation:.......................................................................................................................
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Advantage 2:.....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Recommend the best method of communication VIS should use to inform employees about
the changes to its organisational structure. Justify your answer.
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*2156920051*

1 hour 30 minutes


11_0450_13_2017_1.9
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1 HGH makes truck (lorry) engines using batch production. Quality assurance is important. Last year
profit decreased by 30%. The Managing Director has decided to close one of its two factories
based on the information in Table 1. He said: ‘The problems are high energy costs and increased
competition from imports. The Government should introduce measures such as import quotas to
help protect businesses like us. If it does not then both factories may close'.
Table 1: Cost and other information about the two factories
Factory 1 Factory 2
Output per month 1200 1260
Number of employees 150 140
Labour productivity per month 8 X
Level of trade union membership High Low
Rent of site per month $200 000 $300 000
(a) What is meant by 'quality assurance'?
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(b) Calculate the value of X from Table 1.
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(c) Identify and explain two ways the Government might help HGH become more competitive.
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 one advantage and one disadvantage to HGH of using batch production.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Recommend which factory HGH should close. Justify your answer using the information in
Table 1.
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2 BBT makes a range of breakfast cereals. One of BBT’s objectives is to act in an ethical way with
all of its stakeholders. The Marketing Director has been looking at BBT’s marketing strategy for
some of its products. BBT uses competitive pricing. She thinks that product A, one of its popular
brands, is in the decline stage of the product life cycle. She cannot decide what to do with product A.
Table 2: Information about BBT’s products
Product A Product B Product C
Revenue 2016 $500 000 $360 000 $120 000
% Change in revenue compared to 2015 -40% +30% +50%
Years in market 10 5 2
(a) What is meant by ‘marketing strategy’?
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(b) Identify two reasons for a business to set objectives.
Reason 1:..........................................................................................................................
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Reason 2:..........................................................................................................................
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(c) Identify and explain two ways in which BBT could act in an ethical way.
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 one advantage and one disadvantage to BBT of using competitive pricing.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Do you think BBT should stop selling product A? Justify your answer.
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3 ZumGo is a business partnership between two brothers Richie and Justin. It provides bus tours for
people wanting to go on holiday. After two successful years, Justin wants to expand the business
by buying another bus. This will cost $28 000. When Richie produced the cash flow forecast as part
of ZumGo’s business plan he forgot to include the $6000 for advertising in March. They cannot
decide whether to lease the bus or use all their retained profit to buy one. Leasing would cost $1000
per month for 2 years.
Table 3: Cash flow forecast for 3 months ending 31 March 2018 ($)
January February March
Cash in 36 000 36 000 30 000
Cash out:
Advertising 12 000 0 6000
Other costs 24 000 25 000 22 000
Total cash outflow: 36 000 25 000 W
Net cash flow 0 11 000 X
Opening balance (15 000) (15 000) Y
Closing balance (15 000) (4000) Z
(a) What is meant by ‘business plan’?
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(b) Identify two financial documents (other than a cash flow forecast) that a business might use.
Document 1:......................................................................................................................
Document 2:...................................................................................................................... [2]
(c) Calculate the values of W, X, Y and Z.
W : ......................................................................................................................................
X : .......................................................................................................................................
Y : .......................................................................................................................................
Z : ....................................................................................................................................... [4]
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(d) Identify and explain one advantage and one disadvantage of ZumGo being a business
partnership.
Advantage:........................................................................................................................
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Explanation:.......................................................................................................................
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Disadvantage:....................................................................................................................
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Explanation:.......................................................................................................................
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(e) Which source of finance do you think ZumGo should use for the new bus? Justify your answer.
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4 CYB is an accountancy business. It has 30 highly skilled employees. They work in small teams to
prepare customers' final accounts including those of many multinational companies. CYB believes
effective communication is important to its success. The Human Resources Director needs to recruit
3 new accountants. She said: ‘External recruitment is not easy particularly during an economic
boom. The new recruits will also need either on-the-job or off-the-job training in our computerised
accountancy system.’
(a) What is meant by ‘multinational company’?
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(b) What is meant by ‘economic boom’?
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(c) Identify and explain two methods that CYB could use to communicate with its customers.
Method 1:...........................................................................................................................
Explanation:.......................................................................................................................
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Method 2:...........................................................................................................................
Explanation:.......................................................................................................................
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9
(d) Explain how each of the following stages could help CYB in the recruitment process.
Person (job) specification:.................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Advertising the job vacancies: ..........................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
(e) Do you think it would be better for CYB to use on-the-job or off-the-job training? Justify your
answer.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [6]
© UCLES 2017 11_0450_13_2017_1.9

28

INSERT
1 hour 30 minutes
*6587339393-I*
This Insert contains the case study material.

Anything the candidate writes on this Insert will not be marked.
This document consists of 3 printed pages and 1 blank page.
DC (NF/JG) 143569/1
29
2
Animal Hotel (AH)
AH was a business idea of Elsie’s. She loves animals and wanted to provide services to support
busy animal owners. Services offered include washing, brushing, exercising and caring for animals
overnight. Elsie is a qualified animal nurse. She set up her own business 2 years ago with $10 000
given by her grandfather and a bank loan for $10 000. The business is located in the centre of New
City.
Elsie employs 12 adults and 6 children to help look after the cats, dogs and other animals. The adult
workers are low skilled and are paid the legal minimum wage. The children are all under the age of 12
and are paid very low wages, which are below the legal minimum wage. Materials such as shampoo
and brushes are purchased from a local wholesaler.
Elsie has been very successful in the first two years of trading. If she wants to expand the business she
will need to move to a bigger site and employ many more people. Elsie will need to recruit a manager
for the new site.
She is considering the following three sites.
Site X Site Y Site Z

Size of site 10 000 m2 5000 m2 1000 m2
Buildings Small farm All in good Ready for use
buildings in need of condition. with animals and
repair at a cost of They will need in good condition.
$10 000. changing for use No spending
There is space to with animals, at a required.
expand. cost of $5000.
Distance from New 10 miles and not Edge of New City Centre of New City
City near main road near main road on main road
Cost of site $10 000 $20 000 $60 000
Maximum number of 20 40 120
animals that AH can
care for overnight
Maximum number of 20 30 50
animals that can be
washed and brushed
per day
© UCLES 2017 0450/21/INSERT/O/N/17

30
3
Appendix 1
Advert for Animal Hotel (AH)
All animals washed and brushed and cared for overnight when you are away from home.
Animal training and advice given.
Need your animal looking after when you are at work? AH provides a happy place for your animal
to spend the day! Your animal is worth it!!
Appendix 2
Social media message from customer of AH
Rare animals should not be kept as pets. I saw AH keep a

rare animal in a small cage – it is terrible! I would never take
my dog or any animal to AH! ‘Like’ if you agree.
Likes – 500 
Appendix 3
Selected financial information for AH
Average price per night per animal $5

Average number of animals cared for overnight 25
Average price for washing and brushing an animal $10
Average number of animals per day 25
Total costs of operating AH per day $325
© UCLES 2017 0450/21/INSERT/O/N/17

31
* 6 5 8 7 3 3 9 3 9 3 *

1 hour 30 minutes

The Insert contains the case study.
The business described in this question paper is entirely fictitious.
This document consists of 9 printed pages, 3 blank pages and 1 Insert.
DC (NF) 143535/1
32
2
1 (a) Identify two ways the size of AH can be measured. Explain the limitations of each of these
measures.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [8]
© UCLES 2017 0450/21/O/N/17

33
3
(b) Consider three methods of market research Elsie could use to find out the number and types
of customers for the proposed locations. Recommend the best method for Elsie to use. Justify
your answer.
Method 1: ..................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 2: ..................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Method 3: ..................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................ [12]
© UCLES 2017 0450/21/O/N/17 [Turn over

34
4
2 (a) (i) Calculate the profit per day for AH using the information in Appendix 3.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...................................................................................................................................... [4]
(ii) Identify and explain one way AH could increase profit from the existing site.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...................................................................................................................................... [4]
© UCLES 2017 0450/21/O/N/17

35
5
(b) Consider why a cash flow forecast, an income statement and a balance sheet are important
to AH. Which one of these do you think is most important to Elsie’s decision about how to
finance the new site? Justify your answer.
Cash flow forecast: ...................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Income statement: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Balance sheet: ..........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Conclusion: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................ [12]

36
6
3 (a) Identify and explain two possible ethical issues that AH should consider.
Ethical issue 1: .........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Ethical issue 2: .........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [8]
© UCLES 2017 0450/21/O/N/17

37
7
(b) Consider the advantages and disadvantages of the three sites Elsie is considering.
Recommend which site is the best one for AH to choose. Justify your answer.
Site X: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Site Y: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Site Z: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................ [12]

38
8
4 (a) Identify and explain one advantage and one disadvantage of using social media networks for
the promotion of AH.
Advantage: ...............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage: ............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
.............................................................................................................................................. [8]
© UCLES 2017 0450/21/O/N/17

39
9
(b) Consider the advantages of internal and external recruitment for the new manager.
Recommend which method of recruitment is best for AH to use. Justify your answer.
Internal recruitment: ..................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
External recruitment: ................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................ [12]
© UCLES 2017 0450/21/O/N/17

40

INSERT
1 hour 30 minutes
*5380132857-I*

This document consists of 3 printed pages and 1 blank page.
DC (NF/SG) 143537/1
41
2
Garden Supplies (GS)
GS is a partnership. It was set up last year by two brothers. The business grows plants and trees on
land owned by the brothers in New City. The brothers each invested $5000 of their own money to buy
this land. Customers buy plants and trees from GS for their gardens. GS also cares for the gardens of
several luxury hotels in New City.
The business employs 2 gardeners. However, GS has just gained new business contracts with other
hotels in New City. This expansion will require another 4 gardeners to be recruited. The brothers must
ensure that the gardeners maintain the good reputation of GS or the business will lose customers. The
behaviour of the gardeners is as important as their quality of work.
New gardening equipment is required to ensure their employees can be efficient, such as when cutting
grass or plants. This new equipment will cost $10 000.
GS has a high level of inventory. The brothers want to buy more land to expand the business. They are
considering the following three sites.
Site X:
$5000 for 10 000 m2 of good fertile land. It has been used for growing vegetables. It has no buildings on
the land and no road leading to it. It is 30 miles from New City.
Site Y:
$12 000 for 6000 m2 of land on the edge of New City. There are two large glasshouses for growing
plants. However, they need repairing which will cost another $4000. There is a road nearby but it is not
near a main road. It is 5 miles from the hotels.
Site Z:
$30 000 for 2000 m2 in New City. It has a glasshouse and also has a shop with a car park. It is next to a
main road. There are houses all around it, so there is no room to expand the business.
Appendix 1
Advert for GS
The finest quality plants money can buy anywhere in the world. We sell plants and trees at
the lowest prices available. GS will deliver free of charge. We will also make containers of
plants to your own orders with plants and colours of your choice.
© UCLES 2017 0450/22/INSERT/O/N/17
42
3
Appendix 2
Internet search by the brothers on competitors’ prices for one type of tree
File Edit View Favorites Tools Help
Back Forward Search Favorites Media
Address Go
About 1,670,000 results
Sponsored
Standard Buddleja tree

$32.99
XYZ Garden Centre

$33.99
ABC Tree Depot

$31.99
LMN Home Improvements

$44.99
DEF Tree Centre
Special offer

$19.95
OPQ Homes and Gardens
Appendix 3
GS: financial information for the first year of trading ($)
Revenue from selling plants and trees 40 000

Revenue from hotels 20 000
Cost of materials (e.g. seeds and pots) 10 000

Labour costs 35 000
Transport 8 000
Other expenses 2 000
Financial information for similar garden businesses
Average gross profit margin = 90%

Average profit margin = 20%
Average profit per year = $30 000
© UCLES 2017 0450/22/INSERT/O/N/17
43
* 5 3 8 0 1 3 2 8 5 7 *

1 hour 30 minutes

DC (NF) 143536/1
44
2
1 (a) Identify and explain one advantage and one disadvantage of GS being a partnership.
Advantage: ...............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage: ...........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/22/O/N/17

45
3
(b) Consider the advantages and disadvantages of the following three sources of finance for the
new equipment. Recommend the best source for GS to choose. Justify your answer.
Bank loan: .................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Lease: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Retained profit: .........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[12]

46
4
2 (a) Identify and explain two ways GS can increase added value.
Way 1: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/22/O/N/17

47
5
(b) Consider the following three pricing strategies GS could use when selling plants and trees to
customers. Recommend which is the best pricing strategy to choose to increase GS’s profit.
Cost-plus: ..................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Competitive: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Promotional: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[12]
48
6
3 (a) Identify and explain four characteristics the partners should include in the person (job)
specification when recruiting the new employees.
Characteristic 1: ........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Characteristic 2: ........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Characteristic 3: ........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Characteristic 4: ........................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/22/O/N/17

49
7
(b) Consider the advantages and disadvantages of the three sites the brothers are considering
buying. Recommend which site is the best one for GS to buy. Justify your answer.
Site X: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Site Y: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Site Z: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[12]

50
8
4 (a) Identify and explain two problems for GS of having a high level of inventory.
Problem 1: ................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Problem 2: ................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/22/O/N/17

51
9
(b) Do you think GS will be as successful as other similar businesses? Justify your answer using
the data in Appendix 3 and calculate appropriate ratios.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................ [12]
© UCLES 2017 0450/22/O/N/17

52

INSERT
1 hour 30 minutes
*9612441052-I*

This document consists of 4 printed pages.
DC (CE/CGW) 143539/2
53
2
Belle’s Babies (BB)
BB is a children’s nursery. It is owned by the Belle family as a private limited company. It was started
10 years ago and is managed by Stella Belle who is the nursery manager. BB provides care for babies
and children up to school age during the day – 5 days a week. All of BB’s customers are parents who
work and need their children cared for in the daytime.
The manager is considering also offering an ‘after school care’ service. With this service, children will
be collected from school and then cared for at BB until their parents get them after work.
Stella likes the nursery to operate efficiently. There are also 3 supervisors who are qualified in
childcare. They plan the care and activities for the babies and children during the day. There are 15
young inexperienced care workers who have to be told what to do.
The Belle family wants the business to expand. There has been increasing economic growth in the last
few years, with many new factories being set up in the city. There is a growing demand from parents to
have their children cared for while they go to work. The Government is keen to support nursery start-
ups. This means more parents are able to go out to work and this helps businesses recruit employees.
Unemployment is low.
Stella is considering the following two options for expansion.
Option 1:
Take over an existing nursery business. It has a reputation for being badly managed. However, Stella
thinks that if she invests $5000 into providing better equipment and employs better trained managers
then it can be improved. It is located in a low-income part of the city, so she would have to keep prices
low.
Option 2:
Buy a building and change it to a nursery. The building would be paid for by further investment by the
Belle family. This will take a lot of time to get the building to meet safe standards for children to use
it. Stella forecasts the cost of the improvements and new equipment to be $20 000. This building is
located in a high-income part of the city and Stella thinks she can increase prices at this nursery.
© UCLES 2017 0450/23/INSERT/O/N/17

54
3
Appendix 1
Advert for BB
Care for babies from birth – low prices – children well cared for – lots of
games played to keep them happy – lots of equipment/toys available – highly
recommended by many happy parents
Appendix 2
Organisation chart for BB
Nursery manager (Stella Belle)
Supervisor of area for Supervisor of area for Supervisor of area for

babies 0–1 year children between 1–2 years children between 2–5 years
5 Care workers 5 Care workers 5 Care workers
© UCLES 2017 0450/23/INSERT/O/N/17 [Turn over

55
4
Appendix 3
Break-even chart for existing BB

nursery each day
600
500
400 VC
$ 300
200
100 FC
0
0 10 20 30 40 50
Number of children per day
Price = $12 per child per day

FC = Fixed cost
VC = Variable cost
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.
© UCLES 2017 0450/23/INSERT/O/N/17

56
* 9 6 1 2 4 4 1 0 5 2 *

1 hour 30 minutes

DC (CE/CGW) 143538/2
57
2
1 (a) Identify and explain one advantage and one disadvantage of BB being a private limited
company.
Advantage: ...............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Disadvantage: ...........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/23/O/N/17

58
3
(b) Consider the advantages and disadvantages of the following three ways of researching the
size of the market for an ‘after school care’ service. Recommend the best way for BB to use.
Government population statistics: ............................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Internet research of competitors’ websites: ..............................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Interviews with parents at local schools: ..................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[12]
59
4
2 (a) Identify and explain two leadership styles Stella could use.
Leadership style 1: ...................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Leadership style 2: ...................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/23/O/N/17

60
5
(b) Consider the advantages and disadvantages of the two options for BB to expand. Recommend
the best option to choose. Justify your answer.
Option 1: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Option 2: ...................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Recommendation: ....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[12]

61
6
3 (a) Refer to the organisation chart in Appendix 2. Identify and explain the chain of command for
BB and the span of control for Stella.
Chain of command for BB: .......................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Span of control for Stella: .........................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/23/O/N/17

62
8
(b) (i) Draw on the break-even chart below: Total Cost line, Total Revenue line and the Break-
even point.
Break-even chart for existing BB

nursery each day
600
500
400 VC
$ 300
200
100 FC
0
0 10 20 30 40 50
Number of children per day
Price = $12 per child per day

FC = Fixed cost
VC = Variable cost
[3]
© UCLES 2017 0450/23/O/N/17

63
9
(ii) Consider two ways BB could use to reduce this break-even output. Recommend the
best way to choose. Justify your answer.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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Recommendation: .............................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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[9]

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10
4 (a) Identify and explain two reasons why profit is important to BB.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[8]
© UCLES 2017 0450/23/O/N/17

65
11
(b) Consider how the following three changes might affect BB. Which change is likely to have
the biggest effect on BB’s profit? Justify your answer.
The economy enters recession: ...............................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
The Government lowers income tax: ........................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
The Government opens nurseries offering free child places to low income families:
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Conclusion: ...............................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[12]
© UCLES 2017 0450/23/O/N/17

66
0450/11 Cambridge IGCSE – Mark Scheme October/November
PUBLISHED 2017
Question Answer Marks Guidance
1(a) Identify two characteristics of a successful entrepreneur. 2 Award any reasonable answer.
Knowledge [2 × 1] – award 1 mark for each relevant characteristic
Points could include: risk taker, innovator, creative, self-confident, optimistic, hardworking,
independent, effective communicator, leadership, initiative, self-motivating/determined,
results driven, good at networking, multi-skilled
1(b) Identify two possible reasons why Ella plans to produce the lights in another 2
country
Application: [2 × 1] award 1 mark for each relevant reason
Points might include:

• lower costs
• no local factory or capacity to make it
• access to materials
• Fewer restrictions
1(c) Identify and explain two reasons why obtaining finance might be difficult for Ella’s 4 Application marks may be
business. awarded for appropriate use of
the following:
Knowledge [2 × 1] – award 1 mark for each relevant reason just left college, bicycle light,
Application [2 × 1] – award 1 mark for each explanation in context new business or product or
entrepreneur, produce in
Possible points might include: another country, correct use of
• No business experience [k] of making lights [app] numbers e.g. $8, $500, $750
• Seen as higher risk OR don’t trust her OR can’t repay [k] as just left college [app] and $300.
• Can offer no security [k]
• May not have a business plan OR documentation to support request for finance [k]
• Unproven product [k]
© UCLES 2017 Page 2 of 12

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1(d) Identify and explain one advantage and one disadvantage to Ella of using price 6 Application marks may be
skimming. awarded for appropriate use of
the following:
Knowledge [2 × 1] award one mark for one advantage and one disadvantage just left college, light, new
Application [2 × 1] award one mark for each relevant reference to this business business, new product, new
Analysis [2 × 1] award one mark for each relevant explanation entrepreneur, produce in
another country, raising
Points might include: finance difficult, correct use of
Advantages: numbers, safety features
• Recover costs quicker [k] as need to sell fewer than 300 [app] to pay for
development [an] Note: be wary of ‘higher sales’/
• Gives the image of a quality product [k] which can attract wealthy customers [an] to ‘higher revenue’ as a K point. It
try out the new light [app] must be per unit
• Higher revenue per item[k]
• Break even at a lower output [k]
Disadvantages:
• Put off some potential customers [k] leading to lower sales [an]
• Only work in short term [k] as competitors could produce cheaper alternatives [an]
1(e) Recommend which promotion option Ella should choose. Justify your answer 6 Application marks may be
using the information in Table 1. awarded for appropriate use of
the following:
Knowledge [1] – award 1 mark for identification of relevant points (s) just left college, light, new
Application [1] – award 1 mark for relevant reference made to this business business, produce overseas,
Analysis [2] – award up to 2 marks for relevant development of point(s) raising finance difficult, price
Evaluation [2] – justified decision made as to which method of promotion Ella should use skimming, correct use of
numbers, magazine, website
Points might include: Either option is acceptable if
• Option 2 is cheaper [k] as is $200 less than option 1[app] + [an] justified.
• Ella can’t afford much advertising [k] as a new business [app] she can’t afford a Note: $250 is incorrect as
website [an] this is an incorrect calculation
• Specialist magazine reaches the target market [k] for bicycle lights [app] therefore of the difference between the
likely to sell more [an] cost of a website with and
• Website may not be required [k] already has an order for 300[app] without online ordering

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2(a) What is meant by ‘productivity’? 2
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 [2]
Equation: output divided by Input [2]
Some understanding [1] e.g. output per worker OR measure of efficiency OR rate at
which they produce goods
2(b) Identify two reasons why a business might need working capital. 2
Knowledge [2 × 1] award one mark per reason
• Paying invoices/bills
• Day to day expenses
• Buying raw materials
• Paying wages
• Paying salaries
• Paying rent
• Re-payment of short term debts
• Paying utilities
• Use in an emergency
• Evidence to support requests for finance
2(c) Calculate the following values shown on the cash flow forecast. 4 Note: answers can be written
on the cash flow forecast or in
Application [4] award one mark per correct answer the space provided
W: 5 or 5000 Do not use OFR as no wage

X: 75 or 75 000 calculation is required.
Y: 5 or 5000
Z: (10) or (10 000)
Note: Z must be shown as a negative number to be credited.

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2(d) Identify and explain one advantage and one disadvantage to NMBJ of having a low 6 Application marks may be
level of inventory. awarded for appropriate use of
the following:
Knowledge [2 × 1] – award 1 mark for one advantage and one disadvantage identified cookies/biscuits, related words
Application [2 × 1] – award 1 mark for each relevant reference made to this business such as ingredients or
Analysis [2 × 1] – award 1 mark for each relevant explanation examples, productivity, use of
numbers, batch production,
Possible points might include: $1.5 million.
Advantages:
• Lower inventory holding costs [k] help reduce variable costs [an] Note: Points can refer to raw
• Lower security OR rent costs OR insurance [k] as less space needed [an] for materials or finished goods.
ingredients [app]
• More flexible [k] as adapt to each different batch [app] to keep customers returning
[an]
• Help cash flow [k]
• Less risk of waste OR damage OR obsolescence [k] which could lower productivity
[app]
Disadvantages:
• Possible delays in production [k] as batches delayed [app] leading to lower output
[an]
• Few OR no purchasing economies of scale [k] which could help reduce cash
outflows [app]
• Not able to meet orders [k] for cookies [app] so could damage reputation [an]

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2(e) Do you think paying higher wages is the best way for NMBJ to improve employee 6 Application marks may be
motivation? Justify your answer. awarded for appropriate use of
the following:
Knowledge [1] – award 1 mark for identification of relevant points (s) correct use of numbers, batch
Application [1] – award 1 mark for relevant reference made to this business production, cookies or related
Analysis [2] – award up to 2 marks for relevant development of point(s) words such as ingredients;
Evaluation [2] award up to 2 marks for justified decision as to whether paying higher wages workers leave, profits
is the best way for NMBJ to improve employee motivation increased, 1.5 million,
increased productivity
Points might include
• Only a short term incentive [k] have to pay, whatever the output [an] Candidates could calculate
• Money is the main motivator [k] value of wages per worker (to
• Other ways to motivate e.g. job rotation, enrichment, fringe benefits [k] show increase i.e. $200 to
• Help retain workers [k] so not as many people leave [app] leading to lower $250) App and AN
recruitment costs [an]
• This will increase costs for the business [k] by $15 000 per month [app] so output Note: The focus needs to be on
per worker would need to rise [an] the business for analysis to be
awarded.
e.g. ‘Job rotation is a better
motivator[k] so workers are not
bored’ is only awarded as
knowledge
3(a) What is meant by ‘economies of scale’? 2 Do not award answers such as

'benefit of being big' as this
Clear understanding: [2] factors that lead to lower average costs as a business increases does not explain the term
in size.
Some understanding:[1] benefit of increasing in size

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3(b) What is meant by ‘autocratic leadership style’? 2
Clear understanding: [2] managers expect to be in charge of business and expect their
orders to be followed
OR managers make decisions without consulting workers [2]
Some understanding: [1] workers have no say in decisions OR decisions made by

managers [1]
3(c) Identify and explain one advantage and one disadvantage of GDC’s organisational 4 Application marks may be
structure. awarded for appropriate use of
the following:
Knowledge [2 × 1] award 1 mark for one advantage and one disadvantage identified competitive market, expand to
Application [2 × 1] award 1 mark for each explanation in context other countries, correct use of
numbers, business customers,
Advantages good reputation, delivery,
• Employees have a clearly defined role [k] so know where they fit into delivery parcels, many levels of
process [app] hierarchy, long chain of
• Clear chain of command OR know their manager [k] so know who to ask for help if command, 5000 employees,
problem with a parcel [app] autocratic.
• Employees have a clear career structure [k] so can see how to progress from driver
[app]
• Specialists can be employed [k]
Disadvantages
• Slow communication [k] due to many number of levels [app]
• Heavy workload for managers [k] so do they have time to focus on expansion [app]
• Communication between departments can be difficult [k] which could damage its
good reputation [app]
• Can create rivalry between departments [k]
• Workers can feel isolated [k]

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3(d) Identify and explain two reasons why a good reputation might be important to 6 Application marks may be
GDC. awarded for appropriate use of
the following:
Knowledge [2 × 1] award one mark for each reason competitive market, expand to
Application [2 × 1] award one mark for each relevant reference to this business other countries, use of
Analysis [2 × 1] award one mark for each relevant explanation numbers, business customers,
delivery, parcels, many levels
Points might include: of hierarchy, long chain of
• Build trust OR loyalty [k] so customers want to use their delivery services [app] and command
keep purchasing from them [an]
• Attract new customers [k] and therefore sales will increase [an]
• Easier to raise finance [k] which could help growth plans [app]
• Way to attract OR retain employees [k] so able to offer a good service [an]
• Can charge higher prices [k] for each delivery [app] helping it increase revenue per
unit [an]
• Create brand awareness [k] so customers do not buy from competitors [an] in this
competitive market [app]
• Word of mouth promotion [k]
3(e) Recommend the most suitable way for GDC to expand its business to another 6 Application marks may be
country. Justify your answer. awarded for appropriate use of
the following:
Knowledge [1] – award 1 mark for identification of relevant points (s) competitive market, correct
Application [1] – award 1 mark for relevant reference made to this business use of numbers, business
Analysis [2] – award up to 2 marks for relevant development of point(s) customers, good reputation,
Evaluation [2] award up to two marks for justified decision regards to the most suitable delivery, parcels, many levels
way for GDC to expand. of hierarchy, long chain of
command, delivery vehicles,
Relevant points might include: economies of scale, logistics
• Joint venture [k] with a local delivery business [app] you share the risks of expansion
[an] Note: Do not award marketing
• Merger/takeover [k] they will benefit from local expertise [an] methods e.g. e-commerce or
• Franchise [k] they will receive a license fee [an] hiring an agent.
• Set up own operations [k] they will keep control [an] however this is an expensive
way [an]

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4(a) What is meant by a ‘stakeholder group’? 2 Do not award examples.
Clear understanding [2]: any person or people with a direct interest in the performance
and activities of a business
Some understanding [1]: someone affected by what a business does
4(b) Identify two ways (other than legal controls) that a government might use to 2
influence business decisions.
Knowledge [2 × 1] award one mark per way

• cheaper rents
• loans OR grants OR subsidies
• training
• interest rates
• taxation
• build infrastructure

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4(c) Identify and explain one advantage and one disadvantage of CHONS being a public 4 Application marks may be
limited company. awarded for appropriate use of
the following: coal or mining
Knowledge [2 × 1] award one mark for each advantage and disadvantage related words, correct use of
Application [2 × 1] award one mark for each relevant reference to this business data from table, no
government support, export,
Advantages: shareholders, suppliers,
• Able to sell shares on stock market [k] so no limit to potential number of expansion plans.
shareholders [app]
• Access to more sources of finance [k] so do not have to ask for support from
Government [app]
• Limited liability [k]
• Separate legal identity [k] of mining business and owners [app]
• Better status OR seen as lower risk [k] so suppliers more willing to offer credit [app]
Disadvantages:
• Have to disclose accounts [k] so less able to keep expansion plans secret [app]
• Many legal requirements/regulations [k]
• Selling shares expensive [k]
• Risk of loss of control [k] for the original shareholders [app]

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4(d) Identify and explain two ways in which legal controls might affect CHONS. 6 Application marks may be
awarded for appropriate use of
Knowledge [2 × 1] award one mark for each way identified the following:
Application [2 × 1] award one mark for each relevant reference to this business coal or mining related words,
Analysis [2 × 1] award one mark for each relevant explanation no government support,
correct use of data from table,
Points might include: export, government permission
• Need to provide safety equipment [k] such as helmets for miners [app] increasing to open mine, environment,
costs [an] shareholders, creating jobs,
• Limit working hours [k] so cannot obtain 50 m tonnes [app] 10 000
• Minimum wages [k] so cannot afford to create 10 000 jobs [app]
• Pollution restrictions/permits [k] as coal burning could damage environment [app] so
stakeholders become unhappy [an]
• Where business is located [k] as need Government to allow mine to be built [app]
without it they cannot start operations [an]
• Restrictions on what OR how much can be produced [k]
• Increase costs [k]
• Banning/restricting exports [k] CHONS would not be able to operate because they
are planning to export [an] coal [app]
• Banning/restricting imports [k]

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4(e) Do you think the Government should allow CHONS to open the coal mine? Justify 6 Application marks may be
your answer using the information in Table 3. awarded for appropriate use of
the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) no government support,
Application [1] – award 1 mark for relevant reference made to this business correct use of data from table,
Analysis [2] – award up to 2 marks for relevant development of point(s) export, high unemployment,
Evaluation [2] award up to 2 marks for justified decision as to whether the Government protect the environment, PLC,
should allow CHONS to open the coal mine suppliers, shareholders, traffic
Either viewpoint is acceptable
• Jobs created [k] for 10 000 people [app] so more money to spend in community [an] Do not award reference to coal
• Use up local coal [k] as plan to export it all [app] mine as application as stated
• Impact on environment [k] in question.
• Traffic problems created [k] which could discourage people OR other businesses
setting up in area [an]
• Other businesses will benefit [k] e.g. Suppliers [app]

77
Cambridge Assessment International Education

Paper 1 Short Answer/Structured Response October/November 2017
MARK SCHEME
Maximum Mark: 80
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 2017 series for most
®
Cambridge IGCSE , Cambridge International A and AS Level components and some Cambridge O Level
components.
® IGCSE is a registered trademark.
This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
78
PUBLISHED 2017
1(a) What is meant by ‘tertiary sector’? 2 Do not award examples on own e.g. delivery
business, accountant, shops as does not explain the
Clear understanding [2]: e.g. business or industry which provides term.
OR sells services [1] to consumers OR other sectors of the
economy Do not award names of shops
Some understanding [1] e.g. provide services
1(b) Calculate the revenue gained from an average flight on route 2. 2
Good Application [2] Correct answer 6 600 ($ not needed)
Some application e.g. Method [1] Price × number of passengers
OR 110 × 60

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1(c) Identify and explain two ways in which break-even information 4 Application marks may be awarded for appropriate
could help FlyAway. use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant way • passengers

• (ticket) shops OR website OR e-commerce
Application [2 × 1] – award 1 mark for each explanation in context • routes
• extra for luggage and food
Possible points might include: • airlines
• flights OR trip
• Shows the expected level of profit OR loss at different levels of • correct use of numbers
output [k] to show which routes to expand or cut [app] • competitive market
• Shows the margin of safety [k] if sell over 70 OR 90 tickets • bookings or tickets
[app] • low cost (airline)
• Helps planning OR forecasting OR decision making [k] about
passenger numbers [app] Do not award points such as shows costs
• Can see what will happen if costs OR prices change [k] to see if OR sales OR revenue OR profit on own as too
should close its (ticket) shops [app] vague.
• Help apply for finance [k]
Do not award show break even output or examples
such as know how many tickets to sell as this
information is already known.
Question is asking why it is used.

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1(d) Identify and explain two ways in which FlyAway could improve 6 Application marks may be awarded for appropriate
customer service.   use of the following:
Knowledge [2 × 1] – award 1 mark for each way identified • passengers

• (ticket) shops OR website OR e-commerce
Application [2 × 1] – award 1 mark for each relevant reference • routes
made to this business • airlines
• flights OR trip
Analysis [2 × 1] – award 1 mark for each relevant explanation • correct use of numbers
• competitive market
Possible points might include: • bookings or tickets
• break-even
• Training [k] so that employees know what to do [an] in case of • low cost (airline)
any problems on route [app]
• Seek feedback e.g. carrying out surveys [k] about the airline Do not award suggestions of better
[app] to help improve customer loyalty [an] products/services e.g. free food, new routes, no
• Set OR enforce clear standards OR use Quality Assurance [k] charges for luggage, better planes as these relate to
to ensure that employees provide a consistent service [an] better service/product NOT customer service
• Recruit suitable OR knowledgable employees [k] to work in its
shops [app] so can provide a quicker service to customers [an]
• Treat employees well OR motivate employees [k] so want to
help its passengers [app]
• Handle complaints OR queries quickly [k]
• Open more outlets in cities [k] to sell tickets [app] so more
convenient to buy for customers [an]
• better communication [k] e.g. text if flights are delayed [app]

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1(e) Do you think FlyAway should use only e-commerce? Justify 6 Application marks may be awarded for appropriate
your answer. use of the following:
Knowledge [1] – award 1 mark for identification of relevant points • passengers

(s) • (ticket) shops OR website
• routes
Application [1] – award 1 mark for relevant reference made to this • extra for luggage and food
business • airline
• flights OR trip
Analysis [2] – award up to 2 marks for relevant development of • correct use of numbers
point(s) • competitive market
• bookings or tickets
Evaluation [2] – justified decision made as to whether FlyAway • break-even
should use only e-commerce. • low cost (airline)
Relevant points might include: Points must be from viewpoint of business not
employees or customers e.g. customer convenience
• Less labour OR rent needed [k] so reduced costs [an] which [TV] unless explain how this is a benefit (or not) to
lower break-even [app] the business
• Will need more employees with technical skills [k] to run
website [app] which will add to recruitment costs [an] Do not award answers such as wider target market
• Security issues e.g. risk of fraud OR hacking OR problems if OR high set up cost OR 24 hours OR can be used to
system does not work [k] advertise other services OR easy to update OR
• Not everyone has access to internet or is willing to use internet detailed information as already has a website
[k]
• Cannot attract passing trade [k] without a shop [app]
• Harder to stand out against competitors [k] as it is a
competitive market [app] so less able to attract potential
customers [an]
• Most people prefer to buy via internet [k]

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2(a) Identify two advantages of specialisation. 2 Do not award answers related to a niche market,
e.g. able to charge higher price as this is not
Knowledge [2 × 1] – award 1 mark for each relevant advantage necessarily true of specialisation in general.
Points might include: Do not award answers such as motivate, better

reputation, specialised as too vague
• Increased output OR quicker production OR increased
productivity OR higher efficiency Do not award reduced training costs on its own
• lower unit cost OR economies of scale unless explained
• Workers become expert OR more skilled OR focus on what
they are good at
• Improved accuracy OR better quality OR fewer mistakes OR
reduced waste
• Help improve competitiveness
2(b) What is meant by ‘external cost’? 2 Do not award examples on own as does not explain
the term
Clear understanding [2] impact paid for by the rest of society [1] as
a result of business actions [+1] Some understanding plus example can be awarded
two marks
OR Costs or disadvantages that fall on third parties that is one not
directly involved in the production process [2] Do not award ‘harms environment’ as this is too
vague
Some understanding [1] costs society has to pay

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2(c) Identify and explain two ways in which CGM could try to 4 Application marks may be awarded for appropriate
protect the environment. use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant way • shoes

• raw materials or examples such as leather or
Application [2 × 1] – award 1 mark for each explanation in context sewing or dye or laces
• specialisation
Possible points might include: • external cost
• job production
• Create less waste [k] by changing way make shoes [app] • niche market
• Change materials used OR use sustainable resources [k] so • new technology
reduce external costs [app] • High quality (product)
• Use less materials OR less packaging [k]
• Use less energy OR renewable energy [k] by buying new Buy new technology is [app] and cannot be awarded
technology [app] as [k]
• Buy local [k] reducing distance travelled for raw materials [app]
• Dispose of waste responsibly [k] Do not award ‘reduce pollution’ as this is too vague.
• Recycle [k] any leftover leather [app] Must explain a way that this could be achieved e.g.
• Raise awareness of environmental issues [k] reduce noise
• Develop environmentally friendly products [k]
• Use environmentally friendly machinery OR production
methods OR examples e.g. fit filters or create less smoke or
create less noise [k]
• Reuse [k]

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2(d) Identify and explain one advantage and one disadvantage to 6 Application marks may be awarded for appropriate
CGM of using job production. use of the following:
Knowledge [2 × 1] – award 1 mark for one advantage and one • shoes

disadvantage identified • raw materials or examples such as leather or
sewing or dye or laces
Application [2 × 1] – award 1 mark for each relevant reference • specialisation
made to this business • external cost
• niche market
Analysis [2 × 1] – award 1 mark for each relevant explanation • new technology
• want to increase profit
Possible points might include: • 30 or 26 employees
• $30 000
Advantages: • High quality (product)
• Meet exact customer demands OR unique [k] so able to charge
higher price [an] in a niche market [app]
• Flexible [k] which can help them remain competitive [an] in the
shoe market [app]
• More varied work leads to higher motivation [k] leading to fewer
workers leaving OR less absenteeism [an]
• Skilled workers are less likely to make mistakes [k]
Disadvantage:
• Skilled labour costs more [k] as employ 30 employees [app]
which increases labour OR training costs [an]
• Production can take longer [k] for a high quality product [app]
which reduces (potential) output [an]
• No economies of scale possible [k] when buying raw materials
[app] leading to higher costs [an]
• Costs are higher as it is often labour intensive [k]
• Products are made to order so mistakes can be expensive to
correct [k]

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2(e) Do you think CGM should introduce new technology into the 6 Application marks may be awarded for appropriate
production process? Justify your answer. use of the following:
Knowledge [1] – award 1 mark for identification of relevant points • shoes

(s) • cheaper raw materials or examples such as
leather or sewing or dye or laces
Application [1] – award 1 mark for relevant reference made to this • specialisation
business • external cost
• job production
Analysis [2] – award up to 2 marks for relevant development of • niche market
point(s) • want to increase profit
• 30 or 26 employees
Evaluation [2] – justified decision made as to whether CGM should • $30 000
introduce new technology into the production process • High quality (product)
Relevant points might include: Note: Points can refer to business or employees
• High cost of equipment or retraining [k] at $30 000 [app] which Note productivity can be K or An, but do not award
business might not be able to afford [an] twice
• Ensure consistent quality [k] as machines do not need to rest
[an] Do not award answers which discuss different
• Using cheaper raw materials puts quality at risk [K+APP] production methods
• Increased output OR quicker production OR increased
productivity [k] reducing unit costs [an] so able to increase
profit [app]
• Impact on motivation of employees [k] e.g. as jobs will go from
30 to 26 [app] as work could become less interesting [an]
• workers may struggle to adapt OR resist new training [k]
slowing production OR decreasing productivity [an]
• Risk to reputation [k] in this niche market [app] could lead to
fewer sales [an]
• Risk of job insecurity [k] could lead to other workers leaving as
well [an]
• Fewer employees needed [k] as 4 less [app + an] so lower
labour costs [an]

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3(a) Identify two main parts (other than finance) of a business plan 2 Do not award answers such as sales, wages, costs,
number of resources as these are too vague
Knowledge [2 × 1] award one mark per part
• Executive summary
• Business aims OR targets OR vision statement
• Marketing OR any element of mix e.g. pricing, product, place or
promotion
• Market research OR Competition
• Human resources OR number of employees OR skills needed
• Production details OR break even
• Organisational and management details e.g. structure, type of
business, name and location of business
3(b) What is meant by ‘non-current assets’? 2 Some understanding plus example e.g. buildings can
gain 2 marks
Clear understanding [2]: e.g. resources owned by business to use
for more than one year Do not award ‘fixed asset’ as this is an alternative
term for non-current assets
Some understanding [1]: e.g. things that are owned OR last for
more than a year Do not award examples on own as does not explain
the term 
Do not award long time/long term as too vague
3(c)(i) Calculate the current ratio as at 30 September 2017. 2
Good application [2]:
Correct answer 1.5 (times) OR 1.5:1 OR 3:2
Some understanding [1] correct formula OR 60/40

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3(c)(ii) Explain what the two current ratio results show about Yanis’s 2 Do not award statements such as ‘good’ liquidity as
business. subjective comment
Good application [2] improved OR increased [1] so better able to For 2nd mark must explain what the result shows
repay short term liabilities [1] e.g. better able to repay current liabilities
Some understanding [1] improved OR has more current assets to OFR rule does apply
repay debts
Increased OR improved by 0.3 [1]

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3(d) Identify two possible problems for Yanis if he expands his 6 Application marks may be awarded for appropriate
business. Explain what he might do to overcome each use of the following:
problem.
• kitchen
Knowledge [2 × 1] – award 1 mark for each problem identified • restaurant
• correct use of numbers
Application [2 × 1] – award 1 mark for each relevant reference • 4 (chefs) or 6 workers or 10 in total
made to this business • skilled
• many workers leave
Analysis [2 × 1] – award 1 mark for each relevant solution to the • no bonuses
problem identified • part time contract,
• high hourly rate
Possible points might include: • business plan
• city centre
• Access to finance [k] so could ask the bank for a loan to help
purchase [an] his new restaurant [app] Do not award solutions without an appropriate
• Cash flow problems OR lack of working capital [k] as need to problem having been identified in the response
buy additional ingredients [app] so try to arrange higher credit
limit [an] Do not award effects of the problem – answer must
• Need to recruit more workers [k] so needs to decide on a focus on how to overcome the problem
suitable way to advertise vacancies [an] such as catering
magazines [app] Note: Problems must refer to expansion not his
• Communication problems [k] could hold regular meetings to current situation e.g. his current workers leave
keep everyone informed OR involved [an] with his chefs or
serving staff [app]
• Competition or lack of demand [k] so could use promotions [an]
• Government OR legal controls [k] so may ask for legal advice
to check he is not breaking any laws [an] when selling food
[app]
• Ability to manage or control two locations [k] so could recruit a
manager [an] to oversee the second restaurant [app]
• Having a consistent quality [k]

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3(e) Do you think Yanis should change the way he motivates his 6 Application marks may be awarded for appropriate
chefs? Justify your answer. use of the following:
Knowledge [1] – award 1 mark for identification of relevant points • kitchen

(s) • restaurant,
• correct use of numbers
Application [1] – award 1 mark for relevant reference made to this • 4 (chefs)
business • skilled
• many workers leave
Analysis [2] – award up to 2 marks for relevant development of • no bonuses
point(s) • part time (contract)
• high hourly rate
Evaluation [2] – justified decision made as to whether Yanis should
change the way he motivates his chefs Do not award chefs as application as stated in
question.
Relevant points might include:
Can discuss other ways to motivate chefs e.g.
• Depends on reason why people are leaving [k] as only a part- performance related pay, training but evaluation
time contract [app] must focus on whether he should change the way he
• Little incentive with current method to work harder [k] as no motivates his chefs.
bonuses [app]
• May not be able to afford alternative methods [k] as planning to Do not award answers which discuss advantages of
open another restaurant [app] motivated workforce, e.g. increased productivity,
• Workers may expect high wages [k] as skilled [app] work harder, better quality as this is not the question
• Current system offers flexibility to employees [k] set.
• Could offer bonuses [k] which increases costs [an] so may not
be able to afford to expand [an]
• Increase hours [k]
• Offer job rotation [k] so there is more variety [an]

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4(a) Identify two reasons why markets can become more 2 Do not award answers which explain ways of
competitive. competing e.g. more competitive prices, more
advertising
Knowledge [2 × 1] award 1 mark for each reason identified
• globalisation
• developments in technology such as internet, social media
• improvements in transport links
• lower barriers to entry e.g. government intervention or changes
to legal controls OR free trade
• more businesses enter the market OR more products
4(b) Identify two methods of training that a business might use. 2 Do not award descriptions of methods e.g. watching
someone do the work
Knowledge [2 × 1] award 1 mark for each method identified
Possible methods are:
• on-the-job,
• off-the-job
• induction

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4(c) Identify and explain two ways in which higher taxation might 4 Application marks may be awarded for appropriate
affect VIS. use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant way • insurance

• more competitive market,
Application [2 × 1] – award 1 mark for each explanation in context • retained profits decrease
• customer complaints
Possible points might include: • need training
• Reduced demand OR lower sales [k] for insurance [app] Do not award cars or electrical products as app as
• Increased costs OR lower profit [k] so less money for training they do not sell these products
[app]
• May have to increase prices [k] leading to more customer
complaints [app]
• Might decide to relocate or stop selling some products [k]
especially as some markets have become more competitive
[app]
• Delay plans to expand [k]

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4(d) Identify and explain two advantages to VIS of changing its 6 Application marks may be awarded for appropriate
organisational structure. use of the following:
Knowledge [2 × 1] – award 1 mark for each advantage identified • insurance

• retained profit decrease
Application [2 × 1] – award 1 mark for each relevant reference • customer complaints increased
made to this business • regional managers or regional directors
• shorter chains of command
Analysis [2 × 1] – award 1 mark for each relevant explanation
Do not award cars or electrical products as app as
Possible points might include: they do not sell these products
• Improved communication [k] could reduce (customer) Note: efficiency can only be awarded as [an] if there
complaints [app] leading to better reputation OR as fewer is a clear explanation of what might happen to lead
levels in hierarchy [an] to an increase in efficiency
• Lower labour costs [k] as fewer regional managers [app]
reducing its expenses [an]
• Managing Director OR Senior managers are less remote [k] so
more aware of issues [an] which may be helpful in competitive
market [app]
• Increased (opportunities for) delegation [k] can improve
employee motivation leading to better productivity [an] OR
managers have more time to focus on other things [an]
• Quicker decision making [k]

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4(e) Recommend the best method of communication VIS should 6 Application marks may be awarded for appropriate
use to inform employees about the changes to its use of the following:
organisational structure. Justify your answer.
• insurance
Knowledge [1] – award 1 mark for identification of relevant • retained profit decrease,
method(s) • customer complaints increased
• regional managers or regional directors
Application [1] – award 1 mark for relevant reference made to this • shorter chains of command
business
Do not award cars or electrical products as app as
Analysis [2] – award up to 2 marks for relevant development of they do not sell these products
point(s)
Do not award verbal or written or visual
Evaluation [2] – justified decision made as to the best method of communication, or face to face as not classed as a
communication for VIS to use to inform employees about the method.
changes to its organisational structure
Do not award answers relating to cost or speed as
Relevant methods might include: [an] unless explained
• Letter [k] which can be kept for future reference [an] Candidates can discuss one method in detail or
• Meeting [k] as able to ask questions [an] but some might not go compare different methods
[an]
• Email [k] can be sent to everyone at the same time [an] but
some people may not read it [an]
• Phone call [k] as it allows feedback [an]
• Text (SMS) [k] OR mobile phone [k]
• Notice on office board [k]
• Notice on website [k] OR social media [k]

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Paper 1 Short Answer/Structured Response October/November 2017
MARK SCHEME
Maximum Mark: 80
Published
Teachers.
®
components.
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1(a) What is meant by 'quality assurance'? 2 Do not award answers such as ‘check at
end’ OR ‘check end product’ as this defines
Clear understanding [2] – checking for quality standards [1] throughout quality control
production process OR every stage [1] Do not award explanations of why it is done
Some understanding [1] – e.g. checking work done e.g. manufacturer wants product to be
perfect
1(b) Calculate the value of X from Table 1. 2
Good application: [2] correct answer i.e. 9 (engines)
Some application: e.g. total output/number of employees

OR 1260 / 140
1(c) Identify and explain two ways the Government might help HGH become 4 Application marks may be awarded for
more competitive. appropriate use of the following:
• correct use of data from table 1,
Knowledge [2 × 1] – award 1 mark for each relevant way [max 2] • trade union membership
Application [2 × 1] – award 1 mark for each explanation in context • labour productivity
• rent
Reasons might include: • engines
• Import quotas [k] to limit number of engines [app] • quality assurance
• Import tariffs [k] as it is facing increased competition from imports [app] • (high) energy costs
• Reduce rent OR rates [k] so easier to pay high energy costs [app] • 30% decrease in profit
• Change legal controls OR examples such as lower minimum wage or • factory
quality standards [k] so rivals have to think about quality assurance [app] • increased competition OR competition
• Offer grants OR subsidies OR cheap finance OR loans [k] so can update from imports
machinery OR operations in its factories [app]
• Offer advice [k]
• Provide training [k]
• Lower tax [k]
• Provide infrastructure e.g. build more roads [k]

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1(d) Identify and explain one advantage and one disadvantage to HGH of 6 Application marks may be awarded for
using batch production. appropriate use of the following:
• correct use of data from Table 1
Knowledge [2 × 1] – award 1 mark for an advantage and disadvantage • trade union membership
identified • labour productivity
Application [2 × 1] – award 1 mark for each relevant reference made to this • rent of site
business • engines
Analysis [2 × 1] – award 1 mark for each relevant explanation • increased competition OR competition
from imports
Relevant points might include: • quality assurance (is important)
• high energy costs
Advantage: • factory
• Flexible [k] easier to change engines made [app] to better meet customer
demands [an] Note: business makes engines, not the
• Some economies of scale [k] when buying parts for factory [app] which whole truck
can help reduce average costs [an]
• Less impact if machinery breaks down [k], so other stages can continue Do not award ‘motivated’ or ‘demotivated’ as
OR some output made [an] knowledge, unless explained. The analysis
• Spread risk as can make more than one type of product [k] must explain the impact on the business e.g.
• Variety of products [k] could lead to more sales [an] less workers leave.
• Some variety in work can motivate workers [k] leading to less Do not award answers such as variety of
absenteeism [an] work or economies of scale, unless qualified
OR compared to other method of production.
Disadvantage: Do not award knowledge mark for reference
• Time lost switching OR resetting machines between batches [k] could to whole production as this implies flow.
lead to lost output [an] Answer must relate to idea of it being semi-
• Added cost of moving or storing semi-finished goods [k] finished or between stages to be awarded.
• Inventory may be sitting around between stages [k] increasing costs [an]
so profit may decrease by more than 30% [app]
• One fault could affect entire batch [k] increasing waste [an]

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1(e) Recommend which factory HGH should close. Justify your answer using 6 Application marks may be awarded for
the information in Table 1. appropriate use of the following:
• Correct use of data from Table 1
Knowledge [1] – award 1 mark for identification of relevant point (s) • engines,
Application [1] – award 1 mark for relevant reference to this business • increased competition OR competition
Analysis [2] – award up to 2 marks for relevant development of point(s) from imports
Evaluation [2] – justified decision made as to which factory HGH should close. • quality assurance (is important)
• high energy costs,
Relevant points might include: • profit decreased by 30%
• Rent lower for factory 1[k] saving $100 000 each month [app+an] • batch production
• Productivity in factory 2 is higher [k] by 12.5% higher [app+an]
• Trade union action could create negative publicity [k] as factory 1 has
high number of members [app], damaging reputation [an]
• Current level of output higher in factory 2 [k] by 60 units per month
[app+an]
• Fewer jobs lost if close factory 2 [k] as 10 fewer employees [app+an]
• More jobs lost if close factory 1 [k] as has 150 employees [app] so saving
more labour costs [an]
2(a) What is meant by ‘marketing strategy’? 2
Clear understanding [2]: for example

Plan to use the right combination of the marketing mix [1] to achieve a
particular marketing objective [+1]
OR a plan of action designed to promote and sell a product or service [1] to
achieve a set goal [+1]
OR a plan for promoting products [1] to enter a new market [+1]
Some understanding [1]: how combine the 4 Ps

OR plan for marketing or how to increase sales
OR how to promote a product

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2(b) Identify two reasons for a business to set objectives. 2
Application [2 × 1] – award one mark for each relevant reason

• Measure of success (to judge performance)
• Helps decision-making OR planning OR budgeting
• Gives sense of purpose and direction OR know what you have to do
• Aim or target
• Motivate
2(c) Identify and explain two ways in which BBT could act in an ethical way. 4 Application marks may be awarded for
appropriate use of the following:
Knowledge [2 × 1] – award 1 mark for each relevant way [max 2] • breakfast cereal
Application [2 × 1] – award 1 mark for each explanation in context • ingredients or examples such as wheat
• popular (brand)
Points might include: • correct use of numbers such as number
• Pay fair wages [k] as employees is one of its stakeholders [app] of years, change in revenue, 2016
• Provide better working conditions for workers [k] revenue
• Pay fair price to suppliers OR pay suppliers on time [k] for its ingredients • decline stage
[app] • competitive pricing
• Help growers to prevent damage to farmland OR source environmentally • stakeholders
friendly materials [k] when growing wheat [app] • marketing strategy
• Not sell excess stock cheaply OR not fixing prices [k] as it’s a popular
brand [app]
• Charging a fair price to customers [k]
• Pay taxes in country in which sales are made [k]
• Not employing child labour [k]

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2(d) Identify and explain one advantage and one disadvantage to BBT of 6 Application marks may be awarded for
using competitive pricing. appropriate use of the following:
• breakfast cereal
Knowledge [2 × 1] – award 1 mark for each relevant advantage [max 1] or • ingredients or examples such as wheat
disadvantage identified [max 1] • popular (brand)
Application [2 × 1] – award 1 mark for relevant reference made to this • correct use of numbers such as number
business of years, change in revenue, 2016
Analysis [2 × 1] – award 1 mark for each relevant explanation revenue
• decline stage
Relevant points might include: • ethical
• marketing strategy
Advantage:
• Price will not discourage customers from buying [k] its cereals [app] so
will buy again [an]
• Prevents business losing market share [k]
Disadvantage:
• Time OR money taken to find out competitor’s prices [k] could increase
costs [an]
• Need another way to attract customers [k] e.g. free gift could increase
costs [an]
• Customer may be prepared to pay more [k] as it is a popular brand [app]
so could lose potential revenue OR profit [an]
• May not cover the costs (of production) [k] especially when entering
decline stage [app] so may not be able to break even [an]

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2(e) Do you think BBT should stop selling product A? Justify your answer. 6 Application marks may be awarded for
appropriate use of the following:
Knowledge [1] – award 1 mark for identification of relevant issue(s) [max 1] • breakfast cereal
Application [1] – award 1 mark for a relevant reference to this business • ingredients or examples such as wheat
Analysis [2] – award up to 2 marks for relevant development of point(s) • popular (brand)
Evaluation [2] – justified decision made as to whether BBT should stop selling • correct use of numbers such as number
product A of years, change in revenue, 2016
revenue
Relevant points might include: • decline stage,
• Sales of Product A fallen [k] by 40% [app] • competitive pricing
• Product A still the highest sales [k] by $20 000 [app+an] which is more • ethical
than B & C combined [an] • marketing strategy
• Have other products that are increasing in demand [k]
• Use extension strategies [k] such as changing the cereal packet [app] to Do not award general marketing methods
remind customers OR attract people’s attention [an] so start buying them such as lower prices or advertise, as these
(again) OR increase revenue [an] are not examples of extension strategies
• Could use opportunity to introduce new brands [k] as product C has now
been in the market for 2 years [app]
3(a) What is meant by ‘business plan’? 2 Do not award answers that explain why it is
used e.g. support loan applications
Clear understanding [2] e.g. a document containing the business
aims/objectives and important details about the operations, finance and
owners of a business
OR states aim and/or objectives and shows how business aims to achieve
them
Some understanding [1] states one element of plan e.g. shows marketing
strategy OR production costs

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3(b) Identify two financial documents (other than a cash flow forecast) that a 2
business might use.
Knowledge [2 × 1] – award 1 mark for each relevant document

• Break-even chart
• Balance sheet
• Income statement
• Budget OR specific example, such as Marketing budget OR Operations
budget OR Human Resources budget
3(c) Calculate the values of W, X, Y and Z. 4 OFR can apply as error in W will have
implications for value of X and Z (max 3).
Application [4 × 1] – award 1 mark for each correct value Subsequent answers must be consistent
throughout.
W 28 000
X 2000 NO OFR for Y
Y (4000) OR –4000
Z (2000) OR –2000

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3(d) Identify and explain one advantage and one disadvantage of ZumGo 6 Application marks may be awarded for
being a business partnership. appropriate use of the following:
• Correct use of cash flow numbers,
Knowledge [2 × 1] – award 1 mark for an advantage and a disadvantage • $6000 (advertising)
identified [max 1] • $28 000
Application [2 × 1] – award 1 mark for relevant reference to this business • bus tours
Analysis [2 × 1] – award 1 mark for each relevant explanation • extra buses OR looking to expand
• leasing
Relevant points might include: • two successful years
• all retained profit
Advantage: • business plan or cash flow forecast
• More ideas [k] about what type of tours to offer [app] can help increase • brothers
business sales [an]
• Access to more capital (than sole trader) [k] can help solve cash flow
problems [app] improving chance of survival [an]
• Share workload OR decision making [k] so making business more
efficient [an]
• More skills OR expertise OR can specialise [k], Richie does the finance
[app] allowing time for Justin to focus on his job [an]
• Share loss OR risk [k] so do not have to carry all the financial burden [an]
especially if buy new bus [app]
Disadvantage:
• Disagreements [k] about expansion [app] leading to lost sales OR low
productivity [an]
• Unlimited liability OR each responsible for debts of other [k] so if cannot
repay the $28 000 [app] their personal belongings are at risk as well [an]
• Have to share profits [k] with each brother [app]
• Slower decision-making [k] on whether to lease [app] so lose competitive
advantage [an]

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3(e) Which source of finance do you think ZumGo should use for the new 6 Application marks may be awarded for
bus? Justify your answer. appropriate use of the following:
• correct use of cash flow numbers
Knowledge [1] – award 1 mark for each relevant issue(s) [max 1] • bus tours
Application [1] – award 1 mark for relevant reference to this business • $28 000 (cost of new bus)
Analysis [2] – award up to 2 marks for relevant development of point(s) • $1000 for 2 years (leasing)
Evaluation [2] – justified decision made as to which source of finance ZumGo • all retained profits
should use. • partnership
• two successful years
• business plan or cash flow forecast
Profits: • brothers
• No need to repay [k]
• No interest OR monthly outgoings from cash flow [k] so no additional
Can award answers that discuss other
cash outflows to pay [app]
suitable sources of finance such as loans.
• Have sufficient money [k] as matches total retained profit [app] Do not accept issue shares as not
• Can keep profit for emergency [k] which could be important for appropriate.
partnership [app] as have fewer sources of finance to rely on [an]
• No money left for emergencies [k] as uses all retained profits [app]
Leasing
• Not owned [k] so will not add to value of balance sheet [an]
• Can return if necessary [k] as only 2 successful years [app] but may be
penalty payment [an]
• Able to spread cost [k] so don’t need to find all the cash at start [an] which
could be difficult with a cash deficit in March [app]
• Negative impact on cash flow [k] as forecast ($4000) [app]
• Cheaper [k] as only $24 000 [app + an] saving $4000 [an]
• Can update to new model [k] after 2 years [app]

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4(a) What is meant by ‘multinational company’? 2 Do not award ‘sells in more than one
country’ as could equally apply to exporter
Clear understanding [2] – a business with factories, production or service
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 works/operates in more than one country
4(b) What is meant by ‘economic boom’? 2 For two marks must have both idea that
economy growing and the rate of growth
Clear understanding [2] – strong rise in level of economic activity OR period of
time when GDP rising rapidly Answers must refer to whole economy and
Some understanding [1] – e.g. economy doing well (high GDP) not a single business or product
OR rise in level of economic activity
OR GDP rising
OR identifies feature(s) of an economic boom: such as low unemployment,
rising inflation, resource shortages, high levels of disposable income, high
levels of consumer/business confidence
4(c) Identify and explain two methods that CYB could use to communicate 4 Application marks may be awarded for
with its customers. appropriate use of the following:
• accountants
Knowledge [2 × 1] – award 1 mark for each relevant method [max 2] • examples of financial documents e.g.
Application [2 × 1] – award 1 mark for each explanation in context balance sheet
• multinational company
Reasons might include: • small teams
• Email [k] so that can include attachments such as balance sheets [app] • 3 (new employees)
• Letter [k] explaining customer benefits of new system [app] • new computerised system OR system
• Meeting [k] with representatives from multinational companies [app] • (highly) skilled
• Phone [k]
• FaceTime OR Skype [k] with someone from the small team [app] Note: method selected should be appropriate
• Text OR SMS OR messages on mobile phone [k] for use with customers, not internal
• Social media e.g. Facebook [k] communication

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4(d) Explain how each of the following stages could help CYB in the 6 Application marks may be awarded for
recruitment process. appropriate use of the following:
• accountants
Knowledge [2 × 1] – award 1 mark for each relevant point identified [max 2] • multinational company
Application [2 × 1] – award 1 mark if relevant reference made to this business • small teams
Analysis [2 × 1] – award 1 mark for each relevant explanation • 3 (new employees)
• new computerised system OR system
Relevant points might include: • economic boom
• on the job training OR off the job training
Person (job) specification • (highly) skilled
• Sets out the qualifications needed [k] such as accountancy degree [an] so
know whoever is chosen can do tasks required [an] The focus of the answer should focus on the
• Sets out the skills needed [k] such as team worker [app] so able to work business not employees
effectively with the others in the group [an]
• Sets out experience necessary [k] such as working with multinationals
[app] so able to be effective quickly [an]
Advertising the job vacancies

• Make people aware [k] about the 3 jobs [app] increasing the number of
potential applicants [an]
• Provide people with information about culture OR business [k] such as
working in small teams [app] so more likely to join CYB than competitor
[an]
• Can target suitable people [k] in accountancy magazines [app]

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4(e) Do you think it would be better for CYB to use on-the-job or off-the-job 6 Application marks may be awarded for
training? Justify your answer. appropriate use of the following:
• accountants
Knowledge [1] – award 1 mark for identification of relevant issue(s) • examples of financial documents e.g.
Application [1] – award 1 mark for relevant reference to this business balance sheet
Analysis [2] – award up to 2 marks for relevant development of point(s) • multinational company
Evaluation [2] – justified decision made as to which method of training CYB • small teams
should choose. • 3 (new employees)
• new computerised system OR system
• economic boom
• (highly) skilled
Off-the-job training:
• Not necessarily tailored to individual business [k] so not cost effective [an]
Either option is acceptable.
• Have to pay more OR high cost for specialists [K] which increases costs
[an]
• Skills might not be available in the business [k] so benefit from new
techniques [an]
• Allows for mistakes [k] so can build employees confidence in new
computer system [app] reducing waste [an]
• Workers have access to skilled trainers [k] so know how to use the
system [app]
• Workers can focus 100% on training [k]
On-the-job training:
• Can reinforce errors OR bad practices [k] reducing sales OR damage
reputation [an]
• Fewer new ideas OR skills will be taught [k]
• Control what is taught [k] so workers only learn skills needed [an]
• Employees can carry on working [k] within their team [app] improving
productivity [an]
• Cheaper (than off-the-job) [k]

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Paper 2 Case Study October/November 2017
MARK SCHEME
Maximum Mark: 80
Published
Teachers.
®
components.
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PUBLISHED 2017
Question Answer Marks
1(a) Identify two ways the size of AH can be measured. Explain the 8
limitations of each of these measures.
Knowledge [2 × 1] – award one mark for each way

Analysis [2 × 1] – award one mark for a relevant explanation for each way
Application [2 × 2] – award two application marks for each way
Award one mark for each way (maximum of two), such as:
• Capital employed
• Number of employees
• Sales revenue/revenue/income
• Output/quantity of services/number of customers
Do not accept profit
Award a maximum of three additional marks for each explanation – 2 of

which must be applied to this context – of the way
Indicative response:
The number of employees (K) as the more employees a business has the
larger the business. However, some businesses may use a lot of technology
and therefore have fewer employees. (an) AH is a small business because it
only has18 employees (ap) and it is also a service sector business as it
looks after animals for their owners and therefore they do not use much
technology. (ap)
Possible application marks: Animals; dogs; cats; pets; pet owners; washing
and brushing animals; $10 000 from grandfather; $10 000 from bank loan;
12 adults and 6 children workers; information from Appendix 3 on the costs
and revenue of AH.
There may be other examples in context that have not been included here.

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1(b) Consider three methods of market research Elsie could use to find out 12
the number and types of customers for the proposed locations.
Recommend the best method for Elsie to use. Justify your answer.

Advantages Disadvantages
Questionnaires Quantitative data – Expensive to collect
(L1) estimate size of market May not have expertise to
collect accurate information
Interviews Qualitative information– Interviewer bias possible
(L1) specific information on Expensive to collect
customer needs
Focus groups Qualitative information Answers may be influenced
(L1) by other group members.
Time taken to set up
Business Cheap to collect May be out of date
reports/govern Wide range of data Gathered for another
ment statistics available purpose
(L1) May not be able to May not be valid/accurate
collect this information
themselves
Note: Also reward – Survey; Observation; Newspapers; Internet/online

data; Government statistics.
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 of which
method to choose for the proposed location and why not
the alternative methods.
7–8 marks for limited recommendation of which method to

choose.
Level 2 4–6 marks
Discussion of the method used to find out the number and
types of customers and/or
Detailed discussion of advantages and/or disadvantages of
each method.
Level 1 1–3 marks
Name of a suitable method of research stated or outlined
Advantage and/or disadvantage of the method of research
stated

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1(b) Level 1 – 1 mark for each L1 statement (max of 3 marks)

e.g. Government statistics are cheap to collect.
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. Government statistics are cheap to collect and can be obtained quickly.
However, the information may have been gathered for another purpose and
may be of little use when trying to predict the pet owner requirements at the
different locations. Level 2 – 4 marks plus one application mark for referring
to the pet owners at the new locations)
Level 3 – For L3 to be awarded there needs to be at least two L2 marks

awarded and then a recommendation of which method to choose.
Award up to 2 additional marks for relevant application.
and brushing animals; New City; expand and move to larger site;
information on the three sites; information from Appendix 1 on the AH
advert; complaint on the social media message; information from Appendix
3 on the costs and revenue of AH.
2(a)(i) Calculate the profit per day for AH using the information in 4
Appendix 3.
Revenue per day = (25 × $5) + (25 × $10) (1) = $375 (1)
(Award 1 mark for method of calculating revenue but incorrect answer)
$375 – $325 (1)

(Award 1 mark for method of calculating profit but incorrect answer)
Profit per day = $50 (1)
If $50 with no working shown then award 4 marks.

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2(a)(ii) Identify and explain one way AH could use to increase profit from the 4
existing site.
Knowledge – 1 mark for correctly identifying one way profit can be

increased.
Possible ways:
• Increase revenue (1) e.g. by increasing prices/advertising
more/introducing a new service (1)
• Reduce costs/expenses (1) e.g. by finding cheaper
suppliers/improving efficiency (1)
Analysis award up to 3 marks – 2 of which must be applied to this

context – for a relevant explanation of one way AH could increase profit.
Elsie could increase her revenue (1) by promoting her existing services to
attract more customers.(1) This will lead to more pet owners using her
services and paying for their animals to be washed and groomed. (1)
If costs increase by less than the increase in revenue then profit will
increase. (1)
and brushing animals; qualified animal nurse; set up 2 years ago; $10 000
from grandfather; $10 000 from bank loan; 12 adults and 6 children workers;
paid legal minimum wage; shampoo and brushes purchased from
wholesaler; expand and move to larger site; needs to recruit a new
manager; information on the three sites; information from Appendix 1 on the
AH advert; complaint on the social media message; information from
Appendix 3 on the costs and revenue of AH.
There may be other examples in context that have not been included here
2(b) Consider why a cash flow forecast, an income statement and a balance 12
sheet are important to AH. Which one of these do you think is most
important to Elsie’s decision about how to finance the new site?
Cash flow forecast – predicts cash in-flows and outflows – to avoid liquidity
problem – is there sufficient working capital for the larger premises?
Income statement – records revenue and costs or shows profit and loss –
profit available to reinvest into the new premises – indicator of success of
the business – will there be sufficient revenue from larger premises to make
profit?
Balance sheet – records assets and liabilities – liquidity ratios – stability of

the business – amount of liabilities – value of the existing business – assets
to sell if necessary

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2(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-

9–10 marks for well justified recommendation as to which is
most important to the decision about how to finance the new
site.
7–8 marks for some limited judgement shown in

recommendation as to which is most important in its general
usefulness to the business.
Level 2 4–6 marks
Discussion of each financial statement, how it can be used and
why it is important.
Level 1 1–3 marks
Outline of what each financial statement shows.
Level 1 – 1 mark for each L1 statement (max of 3 marks)

e.g. A balance sheet shows the value of the business.

e.g. A balance sheet shows the value of the business. If Elsie wants to take
out a bank loan then she will need to take the balance sheet to show the
bank manager the value of the assets of the business that can be used as
security for the loan. (4 marks for level 2)

awarded and then a recommendation which is most important to the
decision.
and brushing animals; set up 2 years ago; $10 000 from grandfather; $10
000 from bank loan; 12 adults and 6 children workers; paid legal minimum
wage; shampoo and brushes purchased from wholesaler; expand and move
to larger site; needs to recruit a new manager; information on the three
sites; information from Appendix 1 on the AH advert; information from
Appendix 3 on the costs and revenue of AH.

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3(a) Identify and explain two possible ethical issues that AH should 8
consider.
Knowledge [2 × 1] – award one mark for each ethical issue (‘Doing the right
thing’)
Analysis [2 × 1] – award one mark for a relevant explanation for each ethical
issue
Application [2 × 2] – award two application marks for each ethical issue
Award one mark for each ethical issue (maximum of two), such as:
• Types of animals looked after – all legal?
• Welfare of animals/danger to animals
• Working conditions
• Child labour employed
• Fair pay/paying minimum wage
• Disposal of waste in a responsible manner

which must be applied to this context – of the ethical issue
AH employs children (K) and then pays them below the legal minimum
wage. (ap) This keeps costs low but will give AH a bad reputation leading to
a lower number of customers. (an) This will make it more difficult for Elsie to
expand the business to a larger site as there may be insufficient number of
customers to make this worthwhile. (ap)
and brushing animals; 12 adults and 6 children workers; paid legal minimum
wage; complaint on the social media message; cage; rare animal

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3(b) Consider the advantages and disadvantages of the three sites Elsie is 12
considering. Recommend which site is the best one for AH to choose.

Site X Lowest cost Small farm buildings = not big
Plenty of room for large enough
kennels – owners will like this Needs converting and a long
Room to expand in the future way from customers – would
so will not need to relocate they travel that far?
again soon Additional costs of $10 000 to
repair.
Serving fewer customers than
they have already = 25 per day
Site Y Larger area – more demand Additional costs of $5 000 to
Buildings in good repair so convert the building.
less required to convert them A lot fewer customers served
Serve twice as many than Site Z
customers as Site X and more
customers than existing site
Site Z Existing customers – large High cost – most expensive of
demand – serve the most the three sites
customers Busy area – hard to park
Near to many potential Limited space – small cages –
customers as in centre of city – not able to expand in the future
convenient for customers – may need to move again in
the future
Cramped space may lead to
bad reputation – lower quality
services

9–10 marks for well justified recommendation as to best site to
choose and why not the other sites.
recommendation as to best site to choose.
Level 2 4–6 marks
Detailed advantages and/or disadvantages of each site or
explanation of the impact of the site on the business
Level 1 1–3 marks
Outline advantages and/or disadvantages of each site or
simple comparative statement

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e.g. Site X is the cheapest of the three sites.

e.g. Site X is the cheapest of the three sites and this will reduce the amount
of finance required to purchase the site. However, it is a long way from
customers who are in the city centre and this may mean she has to reduce
prices. (L2 = 4 marks plus one application mark for using the information in
case)

awarded and then a recommendation which justifies the best site to choose.
Possible application marks: Animals; dogs; cats; pets; pet owners; ;washing
and brushing animals; set up 2 years ago; $10 000 from grandfather; $10
000 from bank loan; 12 adults and 6 children workers; shampoo and
brushes purchased from wholesaler; needs to recruit a new manager;
information on the three sites; information from Appendix 1 on the AH
advert; information from Appendix 3 on the costs and revenue of AH.

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4(a) Identify and explain one advantage and one disadvantage of using 8
social media networks for the promotion of AH.
Knowledge [2 × 1] – award one mark for each advantage/disadvantage.

Analysis [2 × 1] – award one mark for a relevant explanation for each
advantage/disadvantage.
Application [2 × 2] – award two application marks for each
advantage/disadvantage.
Award one mark for each advantage/disadvantage (maximum of two), such

as:
Advantages
• Cheap to advertise the business
• Will be seen by many people
• Covers a wide area
• Easy to update
• Target specific customers
• Cheap way to gain customer feedback
Disadvantages
• One unhappy customer can give the business a bad reputation
quickly
• Message lost amongst many messages on social media
• Quickly forgotten and no hard copy to remind customers of the
services provided
• Not all customers have access to internet/social media

which must be applied to this context – of the advantage/disadvantage.
Using social media is very cheap (k) and will quickly get the message to a
lot of people about the services provided by AH. (an) Many of these people
may own animals and need help looking after them. (ap) The message will
raise awareness of AH and make potential customers think about contacting
them to have their animals washed and groomed therefore increasing sales.
(ap)
Possible application marks: Animals; dogs; cats; pets; rare animals; small
cage; washing and brushing animals; animals cared for overnight; pet
owners; business set up 2 years ago; shampoo and brushes; expand and
move to larger site; complaint on the social media message

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4(b) Consider the advantages of internal and external recruitment for the 12
new manager. Recommend which method of recruitment is best for AH
to use. Justify your answer.

Advantages
Internal Lower recruitment costs
recruitment Motivating for employees – increased chance of
promotion – work hard
Already know the business and processes – no induction
training
Suitability of applicants already known by the business
External New ideas
recruitment New skills/experience
Less training needed

9–10 marks for well justified recommendation as to whether to
use internal or external recruitment and why not the alternative.
7–8 marks for some limited recommendation as to whether to

use internal or external recruitment.
Level 2 4–6 marks
Detailed discussion of the advantages of internal and/or
external recruitment.
Level 1 1–3 marks
Outline of the advantages of internal and/or external
recruitment.
Level 1 – 1 mark for each L1 statement (max of 3 marks)

e.g. Internal recruitment is cheaper than external.
Level 2 – one L2 explanation can gain 4 marks and a further mark can be
e.g. Internal recruitment is cheaper than external as it is carried out by
existing employees. They are used to the ways of working at AH and can tell
the new manager how things are done with the animals. The existing
employees can show the manager how the grooming and brushing is
carried out so that customers do not see anything new and are happy with
the way their animals are looked after. (4 marks for L2 explanation plus one
application mark for referring to the grooming and brushing of animals)

awarded and then a recommendation whether to use internal or external
recruitment..

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4(b) Award up to 2 additional marks for relevant application.
Possible application marks: Animals; unskilled workers; dogs; cats; pets;

washing and brushing animals; qualified animal nurse;12 adults and 6
children workers; information from Appendix 1 on the AH advert; complaint
on the social media message;
There may be other examples in context that have not been included here

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MARK SCHEME
Maximum Mark: 80
Published
Teachers.
®
components.
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1(a) Identify and explain one advantage and one disadvantage of GS being a 8
partnership.
Knowledge [2 × 1] – award one mark for each advantage/disadvantage

Analysis [2 × 1] – award one mark for a relevant explanation of each
advantage/disadvantage
Award one mark for each advantage/disadvantage (maximum of two), such as:
Advantages
• Increased capital investment
• Share responsibilities/specialise/more skills/more ideas
• Share risks/losses
Disadvantages
• Unlimited liability
• No separate legal identity
• Share profit
• Lack of continuity
• Arguments between partners
Award a maximum of three additional marks for each explanation – 2 of which must
be applied to this context – of the advantage/disadvantage.
More capital can be invested by each partner than if the business was a sole trader.
(k) In this case the partners each invested $5000. (ap) This meant that less capital
was borrowed therefore reducing interest payments. (an) This will make it easier for
GS to expand. (ap)
Possible application marks: set-up last year; set up by 2 brothers; grows plants and
trees; partners invested $5000 each; looks after the gardens of luxury hotels; want to
buy more land to expand; information from Appendix 1; information from Appendix 2.

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1(b) Consider the advantages and disadvantages of the following three 12

sources of finance for the new equipment. Recommend the best source for GS
to choose. Justify your answer.
Bank loan Raise large amounts of capital Interest paid
Repay in instalments Adds to expenses
Need for security/collateral
Lease No capital to find Not an asset of the business
Maintenance covered by leasing Expensive
company
Retained No interest paid May not be enough as only
profit Not repaid been in business for one year
Reserves not available for
alternative uses
Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark

scheme below.
Knowledge/Analysis/ Evaluation
9–10 marks for well justified recommendation of which source of
finance to choose and why not the alternative sources.
7–8 marks for limited recommendation of which source of finance

to choose.
Level 2 4–6 marks
Detailed discussion of advantages and/or disadvantages of each
source of finance.
Level 1 1–3 marks
Outline of each advantages and/or disadvantages of each source
of finance.

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1(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Retained profit is
readily available and does not have any interest payments to be made.
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. Retained profit is readily
available and does not have any interest payments to be made. However, as the
business is only small and a partnership it may not have enough profit in reserves to
pay $10 000 for the new equipment. (4 marks for one Level 2 answer plus one
application mark for referring to the cost of the new equipment)
Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and
then a recommendation of which source of finance to choose.
Possible application marks: Partnership; set-up last year/new business; set up by 2

brothers; grows plants and trees; partners invested $5000 each; $5000 profit; looks
after the gardens of luxury hotels; new gardening equipment; cost $10 000 to
purchase new equipment; information on the three sites in the case; information from
Appendix 1; information from Appendix 3.

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2(a) Identify and explain two ways GS can increase added value. 8
Knowledge [2 × 1] – award one mark for each way

Analysis [2 × 1] – award one mark for a relevant explanation of each way
Application [2 × 2] – award two application marks for each way
Award one mark for each way (maximum of two).
• Increase price (1) – explained why/how prices can be increased (1) such as:
– improve quality of products such as plant pot containers
– improve reputation
– establish brand image
– improve product features such as excellent customer service
• Reduce raw material costs (1) explanation of how these can be reduced (1)
such as:
– buy cheaper sources of flowers/find cheaper suppliers
– lower the quality of inputs such as cheaper seeds
– reduce the amount of inputs needed, for example less fertiliser
be applied to this context – of the way.
Reduce raw material costs (k) such as buy cheaper seeds and fertilizer (ap). GS could
change to a cheaper supplier of flowers, plants and trees. (ap) This will increase the
gap between price and input costs and therefore increase added value. (an)
Possible application marks: Partnership; set-up last year; set up by 2 brothers; grows
plants and trees; partners invested $5000 each; looks after the gardens of luxury
hotels; holds high level of inventory; information on the three sites in the case;
information from Appendix 1; information from Appendix 2; information from Appendix
3; gardeners maintaining a good reputation for the business.

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2(b) Consider the following three pricing strategies GS could use when selling 12
plants and trees to customers. Recommend which is the best pricing strategy to
choose to increase GS’s profit. Justify your answer.
Cost-plus Easy to apply Lose sales if costs higher than
Ensures costs covered competitors
Competitive Sales high as price at realistic Research costs to compare
level prices
Does not take account of
different quality product
Many competitors established in
the market
Promotional Useful for getting rid of old Sales revenue will be lower as
plants/not selling well price of each item low
Help to renew interest if sales
falling
Attracts more customers

scheme below.
9–10 marks for well justified recommendation as to which pricing
strategy to choose to increase profit and why not the other
strategies.
7–8 marks for some limited judgement shown in recommendation

as to which pricing strategy to choose.
Level 2 4–6 marks
Discussion of advantages and/or disadvantages of each pricing
strategy.
Level 1 1–3 marks

Outline advantages and/or disadvantages of each pricing strategy.

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2(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Competitive pricing will
increase sales as prices are set at similar level to competitors.
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. Competitive pricing will
increase sales as prices are set at a similar level to competitors and may attract
customers from competitors. More people will buy their garden products from GS as
they set high quality standards for all their plants and trees and their gardening
services. (4 marks for one L2 answer plus one application mark for referring to high
quality gardening services)
then a recommendation of which pricing strategy to choose.
Award up to 2 additional marks for relevant application
Possible application marks: GS sells plants at the lowest prices available; finest quality
plants; partnership; set-up last year; set up by 2 brothers; new business; looks after
the gardens of luxury hotels; similar gardening businesses; holds high level of
inventory; information from Appendix 1; information from Appendix 2; information from
Appendix 3.

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3(a) Identify and explain four characteristics the partners should include in 8
the person (job) specification when recruiting the new employees.
Application [4 × 1] – award one mark for each suitable characteristic for this
business
characteristic
Award one mark for each characteristic (maximum of four), such as:
• Experience of gardening
• Punctual
• Polite
• Honest/trustworthy
• Qualifications in gardening
• Reliable
• Clean/neat appearance
• Physically fit
• Good communicator
• Hard working
There may be other possible answers.
Award an additional mark for each explanation in context
The applicants will need to have experience of gardening (1) this is to ensure that they
can do the job that GS requires of them and maintains a high quality service to
customers. (1)

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3(b) Consider the advantages and disadvantages of the three sites the 12
brothers are considering buying. Recommend which site is the best one for GS
to buy. Justify your answer.
Site X: Large site Far away from market – 30
Lowest cost miles – high travel costs
Fertile land Buildings need to be built –
additional cost
Site Y: Near to city at lower cost Repair costs of $4000 has to be
Nearer to hotels than site X paid
Large glasshouses already Still have to travel to customers
there – less cost and quicker to
get started trading from the site
Site Z: Very close to market/customers Highest cost -$30 000
Close to existing site Smallest area and little chance
Shop and car park on site of expansion in the future
attracting customers

scheme below.
9–10 marks for well justified recommendation as to best site to
choose and why not the other sites.
7–8 marks for some limited judgement shown in recommendation

as to best site to choose.
Level 2 4–6 marks
Explanation of advantages and/or disadvantages of each site.
Level 1 1–3 marks
Statement of advantages and/or disadvantages of each site.

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3(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Site Z is the most
expensive of the three sites.
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. Site Z is the most
expensive of the three sites and this will make it more difficult to finance the purchase
of the land. Also there is no room to expand and so GS may have to move again if it
wants further expansion in the future. However, it is near to customers and this will
reduce cost and time for the gardeners getting to and from the hotels. (4 marks for one
L2 answer plus one application mark for referring to hotels, gardeners, the land being
most expensive)
then a recommendation which justifies the best site to choose.
Possible application marks: Partnership; set up by 2 brothers; information about the

three sites found in the case study.

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4(a) Identify and explain two problems for GS of having a high level of inventory. 8
Knowledge [2 × 1] – award one mark for each problem.

problem.
Application [2 × 2] – award two application marks for each problem.
Award one mark for each problem (maximum of two), such as:
• Capital tied up/ liquidity problem

• High levels of working capital required
• Inventory may deteriorate and be wasted – loss of profit
• Inventory may go out of date/seasonal changes /fashion changes – cannot sell
inventory unless at a discount – reduce profit
• Costs of storage space
• Maintenance costs such paying wages of workers to water plants
be applied to this context – of the problem.
Capital is tied up in stock (k) and this will mean GS has large amounts of plants and
trees taking up space. (ap) The plants and trees will need to have been paid for before
the gardeners will need them for planting at the hotels (ap) and this will increase the
cash outflow, which may cause a cash flow problem for GS, but will certainly reduce
its liquidity. (an)
Possible application marks: GS want to expand the business; wilting/dying plants;

grows plants and trees; looks after the gardens of luxury hotels; want to buy more land
to expand; information on the three sites in the case; ornamental trees; information
from Appendix 1; information from Appendix 2; information from Appendix 3.

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4(b) Do you think GS will be as successful as other similar businesses? Justify 12

your answer using the data in Appendix 3 and calculate appropriate ratios.
Profit $5 000 (L2)

GPM 50000/60000 × 100 = 83% (L2)
NPM 5000/60000 × 100 = 8% (L2)
ROCE 5000/10000 × 100 = 50% (L2)
Total revenue $60 000 (L1)
Total cost $55 000 (L1)
Level 3 judgements may be based on:

– Survival in the first year – GS may build on this in the future
– GS ratios worse than competing businesses but only just started-up
– Comparison of the figures and suggestions made of why GS ratios might be
worse than the ratios of other similar businesses
– Other information that may be useful to make a judgement

scheme below.
9–10 marks for well justified conclusion as to whether or not GS will
be as successful as other similar businesses.
7–8 marks for some limited conclusion as to whether or not GS will

be as successful as other similar businesses.
Level 2 4–6 marks
Correct calculation of profit &/or profitability ratios.
Level 1 1–3 marks
Outline of the significance of the financial information.

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4(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. The average profit for
other businesses is higher than GS.
Level 2 – 1 × L2 calculation can gain 4 marks and a further mark can be awarded for
each additional L2 calculation (max 6 marks) e.g. Gross profit margin is 83%. (4 marks
for L2 calculation)
Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded for
correct calculation of profit and appropriate ratios and then a conclusion as to whether
or not GS will be as successful as other similar businesses.
Possible application marks: Partnership; set-up last year; set up by 2 brothers; grows
plants and trees; looks after the gardens of luxury hotels; partners invested $5000
each; total investment of $10 000; new gardening equipment required costing $10
000; holds high level of inventory; want to buy more land to expand; information on the
three sites in the case; information from Appendix 1; written information from Appendix
3 e.g. seeds but NOT the financial information itself.

132

MARK SCHEME
Maximum Mark: 80
Published
Teachers.
®
components.
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1(a) Identify and explain one advantage and one disadvantage of BB being a 8
private limited company.
Knowledge [2 × 1] – award one mark for each advantage/disadvantage

Award one mark for each advantage/disadvantage (maximum of two), such

as:
Advantages
• Increased capital investment – from sale of shares
• Limited liability
• Continuity
Disadvantages
• Only sell shares to family and friends
• Accounts have to be audited
• Legal formalities to set up and run

which must be applied to this context – of the advantage/disadvantage.
The Belle family have limited liability (k), which means that if there is a fall in
demand for nursery care and BB goes bankrupt (ap) then the Belle family
will not have to use their own personal possessions to pay company debts.
(an) This makes it safer for the Belle family and their friends and they will
feel the rest of their money is safe when buying shares in the nursery. (ap)
Possible application marks: childcare; parents; children’s nursery; started 10

years ago; care for babies and children under 5; children under school age
looked after for parents at work; offer an ‘after school care’ service; details
about Option 1 and 2.

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1(b) Consider the advantages and disadvantages of the following three 12

ways of researching the size of the market for an ‘after school care’
service. Recommend the best way for BB to use. Justify your answer.

Government Cheap to collect May be out of date
population Accurate as official
statistics statistics
Internet research Cheap to collect May not be up to date
of competitors Quick to collect Not all competitors have
websites websites
Search may miss some
competitors
Interviews with Gathers opinions – Expensive to collect
parents at local identify needs and wants Only a sample surveyed
schools of potential target market Time consuming

9–10 marks for well justified recommendation of which
method of research to choose and why not the alternative
methods.
7–8 marks for limited recommendation of which method of

research to choose.
Level 2 4–6 marks
each method of research.
Level 1 1–3 marks
Outline of advantages and/or disadvantages of each method
of research.

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1(b) Level 1 – 1 mark for each L1 statement (max of 3 marks).

e.g. Government population statistics might be out of date.

awarded for each additional L2 explanation (max 6 marks).
e.g. Government population statistics might be out of date and may have
been collected quite a long time ago. This will mean that the business will
not know about the number of children who could possibly need to be
looked after. However, these statistics will be easily obtained and will be
cheap to gather.
(4 marks for L2 plus one application mark for referring to children needing to
be looked after)

awarded and then a recommendation of which method of research to
choose.
Possible application marks: children/kids; children’s nursery; private limited

company; care for babies and children under 5; children under school age
looked after for parents at work; growing demand from parents to have their
children looked after; government to support nursery start-ups; details about
Option 1 and 2.

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2(a) Identify and explain two leadership styles Stella could use. 8
Knowledge [2 × 1] – award one mark for each leadership style

leadership style
Application [2 × 2] – award two application marks for each leadership style
Award one mark for each leadership style (maximum of two), such as:
• Democratic
• Autocratic
• Laissez-faire

which must be applied to this context – of the leadership style.
Stella could use an autocratic leadership style (k) as she only has 18
employees to manage (ap) which will make it easier to keep control of
everyone and tell them what to do. (an) Stella will know what all employees
should be doing and she may want to ensure that everyone looks after the
children in the way she wants. (ap)
Possible application marks: childcare; parents; children’s nursery; started 10

years ago; care for babies and children under 5; children under school age
looked after for parents at work; offer an ‘after school care’ service; details
about Option 1 and 2.

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2(b) Consider the advantages and disadvantages of the two options for BB 12
to expand. Recommend the best option to choose. Justify your
answer.
Option 1 • Poor area of city – • Lower prices – less
high demand revenue
• Lower operating • Overcome poor
costs reputation – badly
• Quickly open as managed - may
already a nursery – increase advertising
already has children costs
attending • Costs of training
• Less to invest in staff
improvements
$5000 investment
needed
Option 2 • Expensive part of • High cost of
town – raise prices – conversion –
raise revenue $20 000
• Family paid for the • Time delay before it
building – no can open – lost
borrowing required revenue

9–10 marks for well justified recommendation of which option
to choose and why not the alternative option.
7–8 marks for limited recommendation of which option to

choose.
Level 2 4–6 marks
each option.
Level 1 1–3 marks

Outline of each advantages and/or disadvantages of each
option.

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2(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Option 1 is in
a low income part of the city and so prices will have to be kept low.

awarded for each additional L2 explanation (max 6 marks) e.g. Option 1 is in
a low income part of the city and so prices will have to be kept low.
However, costs will be lower in this part of the city and many families may
need children looking after so they can go to work, leading to higher
demand and higher profits. (4 marks for L2 plus one application mark for
referring to families needing their children looked after while they go to work)

awarded and then a recommendation of which option to choose.

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3(a) Refer to the organisation chart in Appendix 2. Identify and explain the 8
chain of command for BB and the span of control for Stella.
Knowledge [2 × 1] – award one mark each for chain of command and span
of control.
Analysis [2 × 1] – award one mark each for explanation of chain of
command and span of control
Application [2 × 2] – award two application marks each for chain of
command and span of control
Award one mark each for chain of command and span of control (maximum
of two).

which must be applied to the information in Appendix 2 – of the chain of
command and span of control.
Chain of command is the structure in an organisation which allows

instructions to be passed down from senior management to lower levels of
management. (k) In this case BB has 3 levels (ap) with Stella at the top and
then the next layer are supervisors and finally there are the child care
workers. (ap) So in BB any instructions from Stella pass through these three
layers. (an)
Span of control is the number of subordinates working directly under a

Manager. (k) In this case Stella has a span of control of 3. (ap) She
commands the three supervisors in their work each day and this is quite a
narrow span of control as it is a small business, (ap) which ensures that
there is good communication. (an)
Possible application marks: children’s nursery; parents; information from

Appendix 2.

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3(b)(i) Draw on the break-even chart below: 3

Total Cost line, Total Revenue line and the Break-even point.
600
500
400
Total revenue
300
Total Cost
200 Fixed Cost
100
0
0 10 20 30 40 50
Break-even output = 25 children per day
1 mark for Total Cost line

1 mark for Total Revenue line
1 mark for indicating Break-even output at 25
3(b)(ii) Consider two ways BB could use to reduce this break-even output. 9
Recommend the best way to choose. Justify your answer.

Increase prices – increases gradient of TR line – lowers B/E output but
sales may fall as a result
Lower variable costs – reduces gradient of VC/TC line – lowers B/E output
but materials may be of poorer quality – may harm reputation of the
business.

9 marks for well justified recommendation as to best way to
lower B/E output and why not the other way.

recommendation as to best way to lower B/E output.
Level 2 4–6 marks
Detailed discussion of ways to lower the B/E output.
Level 1 1–3 marks
Outline of how to lower B/E output.

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3(b)(ii) Level 1 – 1 mark for each L1 statement (max of 3 marks)

e.g. Increase price of nursery care

e.g. Increase price of nursery care will increase the gradient of the total
revenue line which will reduce the point at which total revenue and total
costs are equal, lowering the break-even number of children required per
day but sales may fall as a result. (4 marks for L2)

awarded and then a recommendation which justifies the best way to choose.
4(a) Identify and explain two reasons why profit is important to BB. 8
Knowledge [2 × 1] – award one mark for each reason.

reason.
Application [2 × 2] – award two application marks for each reason.
Award one mark for each reason (maximum of two), such as:
• Provide a source of funds for investment/improvement of the
business
• Provide a source of funds for expansion of the business
• Reward for risk taking
• Provides a return on shareholder investment
• Pay for unexpected events

which must be applied to this context – of the reason.
Profit can provide a source of funds for the business (k) and will reduce the
need to take out a bank loan to pay for the expansion to another building.
(ap) This will mean that the costs of the expansion will be lower as interest
payments on loans will be less. (an) This may allow Stella to spend more
money on the new building to ensure that the nursery has excellent facilities
for children therefore maintaining a good reputation. (ap)
Possible application marks: shareholders; dividends; parents; children’s

nursery; private limited company; started 10 years ago; care for babies and
children under 5; children under school age looked after for parents at work;
offer an ‘after school care’ service; growing demand from parents to have
their children looked after; details about Option 1 and 2.

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4(b) Consider how the following three changes might affect BB. Which 12
change is likely to have the biggest effect on BB’s profit? Justify your
answer.

The economy Less demand as workers lose jobs – no need for
enters recession child care
More women may be forced to take any jobs they
can get – more demand
The Government More disposable income – increases demand
lowers income tax Women choose to stay at home with children and
not work if more disposable income for the family –
less demand
The Government Increased competition – less demand
opens nurseries Encourages more women to work – increases
offering free child demand
places to low
income families

9–10 marks for well justified conclusion as to which change
will have the biggest effect on profit and why the others have
less effect.
7–8 marks for some limited conclusion as to which change

will have the biggest effect on profit.
Level 2 4–6 marks
Discussion of the effects of the changes on BB
Level 1 1–3 marks
Outline of the effects of the changes on BB.

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e.g. Less demand for workers and so there will be less demand for child
care.
Level 2 – 1 × L2 calculation can gain 4 marks and a further mark can be

awarded for each additional L2 calculation (max 6 marks)
e.g. Less demand for workers and so there will be less demand for child
care. This may reduce the revenue for BB nursery. However, as family
incomes are lower, more parents may have to go out to work to add to the
family income and so there may be more demand for children to be looked
after and so increase revenue and profit. (4 marks for L2 plus one
application mark for referring to demand from parents for children to be
looked after)

awarded and then a conclusion as to which change will have the biggest
effect on BB’s profit.
Possible application marks: childcare; children; parents; private limited

company; started 10 years ago; care for babies and children under 5;
children under school age looked after for parents at work; offer an ‘after
school care’ service; 3 qualified supervisors in childcare;15 young
inexperienced care workers; many new factories set up; growing demand
from parents to have their children looked after; government to support
nursery start-ups.

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0450 Business Studies November 2017
Principal Examiner Report for Teachers
BUSINESS STUDIES
Paper 0450/11
Short Answer/Structured Response
Key messages
Application within answers was an improved area of candidate responses, but a number of candidates still
struggle to demonstrate this aspect in their work.
The lack of effective evaluation continues to be a problem within many scripts. Candidates would benefit
from greater guidance in how to produce an evaluative answer to part (e) questions. Candidates should be
reminded that an evaluation must be a justified decision that follows from the points raised in the answer not
a repetition of points already explained.
General comments
Candidates were clearly aware of most aspects of the syllabus tested by the examination. There was some
evidence that candidates did not fully understand some aspects of the syllabus. This was shown in
Questions 1(c), 1(d), 2(a), 2(b) and 3(a) of the paper. Centres would do well to spend time ensuring that
candidates are fully aware of all elements of the syllabus. When a question stem contains some numerical
data, as seen in each of the questions on this paper, candidates should be encouraged to make use of this
data within their answers to show their strong understanding of the information provided. This was not
always seen in candidate’s responses. In parts d and e of each question candidates will often be awarded
application and analysis marks for correct calculations using information provided.
Candidates should be encouraged to:
• Learn precise definitions for key terms.

• Use calculations were appropriate.
• Refer directly to the information within the stem of the question throughout their answers to ensure that
points raised are appropriate for that organisation.
• Ensure that within parts (c) and (d) of each question a different point of application is used for each
separate point.
• In parts (d) and (e) of each question it is important to explain the impact of points identified on the
business described in the stem of the question.
Comments on specific questions
Question 1
(a) Candidates were generally secure in their knowledge of this aspect of the syllabus. Many
candidates gained both of the marks available. Risk-taker and innovative being the most frequently
provided answers.
(b) This question differentiated between candidates. A number of candidates misinterpreted the
information provided and discussed the benefits of trading abroad such as gaining a new market.
This was not the focus of the question and such answers could not be rewarded. Another common
error was to identify that producing abroad would be cheaper without identifying why this would be
true. The best answers identified that this may give access to materials that would otherwise not be
available or lower costs due to lower wages.
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(c) Candidates were generally very aware of the material presented in the stem of the question and
attempted to use this to explain their answer, therefore gaining the application marks. The
strongest answers identified a suitable reason, such as those listed in the mark scheme, and then
explained why this would be true for Ella’s business using the material to support their reasoning.
Very few candidates used the cost information provided in support of their answer. A number of
candidates explained that the business would lack internal sources of finance. Such answers could
not be given credit, as the question required an explanation of external sources.
(d) Candidates who understood the term ‘price skimming’ often scored high marks on this part of the
question. A number of candidates were clearly not aware of the meaning of this term.
(e) This area of the syllabus was well understood by many candidates who were able to display a large
amount of knowledge. The strongest candidates were able to use the information provided to justify
their choice, often by calculating the difference in cost between the options. Such answers often
gained all of the knowledge, application and analysis marks available. Very few candidates
provided a justified conclusion and gained evaluation marks. Weaker candidates gained only the
knowledge mark by producing a list of general statements covering the advantages and
disadvantages of the methods suggested. A small number of candidates did not discuss the
methods identified but suggested pricing methods. These answers could not gain any of the marks
available.
Question 2
(a) There was some evidence that a number of candidates were not familiar with this ratio. A small
number of candidates wrongly provided a definition of production. The strongest answers provided
both a definition and the relevant equation.
(b) The majority of candidates were aware of the purpose of working capital and gained both marks.
A number of candidates gave very imprecise answers that could not be rewarded such as “to keep
productivity”.
(c) This question clearly differentiated between candidates, with many gaining either 4 marks or zero.
An error made by a number of candidates was to not make clear that the Z figure was a negative
number.
(d) Some candidates clearly did not fully understand this term. The best answers explained how lower
storage costs would benefit the business and the problems that they would face if they could not
meet an unexpected order. Stronger candidates made use of the information provided and talked
about the storage of food items.
(e) Candidates generally displayed very strong knowledge of motivational theorists, giving detailed lists
of ways that workers could be motivated. Only the most able candidates were able to apply that
knowledge to the business in the question. The strongest answers considered the positive and
negative aspects of increasing wages and used the information provided to calculate the effect
upon the firm’s financial position. Evaluation for the majority of candidates was generally very weak
being a repeat of the points stated earlier in the answer.
Question 3
(a) This concept was not generally well understood by candidates. A number of candidates did not
attempt this question. A common error made by candidates was to give imprecise statements such
as ‘costs would fall’ or ‘a benefit of being big’. These answers do not show clear understanding of
the concept and could not be rewarded.
(b) Generally well answered.
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(c) Candidates were more confident in explaining the disadvantages of this hierarchical structure than
the advantages. The strongest candidates were aware that a hierarchy gives potential for
promotion and a clear chain of command. Application marks were awarded for awareness that this
company had many levels in the hierarchy or a long chain of command, candidates very rarely
used any other piece of information from the scenario in this question. This lack of variety in the
application meant that candidates frequently scored three rather than four marks.
(d) This question was well answered by many candidates. Candidates recognised the importance of
reputation to businesses such as the one described in the question and were able to correctly
analyse the effect. Weaker candidates struggled to identify more than one piece of application and
therefore often also repeated their analysis in both points.
(e) Candidates clearly understood the idea of expansion within business. A number of weaker
candidates did not understand the focus of the question. Such answers focussed either upon the
benefits to a business of expanding or ways a business could gain customers in a new market.
Such answers could not be rewarded. Better answers recognised the different ways that a
business could expand, used information from the stem of the question to support the benefits or
costs of each method and came to a supported conclusion of the best method for this business.
The stronger answers focussed upon merger or franchising.
Question 4
(a) This term was well understood by many. A significant minority confused stakeholders with
shareholders.
(b) Generally very well answered. A number of candidates were confused by the instruction in the
question ‘other than legal controls’ and gave examples of laws and regulations that were more
suited to an answer for part (d).
(c) The majority of candidates identified the advantage of selling shares on the stock exchange and
the problem of potentially being taken over, or having to share financial information publicly. Only
the strongest candidates were able to provide two distinctly different points of application and gain
all of the marks available. As in previous examinations a number of candidates confused public
limited companies with public corporations and incorrectly discussed government involvement.
(d) Candidates were not confident in their ability to answer this question. A number of candidates did
not attempt this question. The best candidates gained the majority of the marks available by
providing detailed analysis of two relevant legal controls that might affect a mining company.
Frequently these were examples of employment legislation such as minimum wage laws. Even the
most able candidates often struggled to provide two distinctly different points of application. A
common mistake made by weaker candidates was to explain how taxes rather than legal controls
would affect the business.
(e) This was a question that differentiated well between candidates. Some candidates were clearly
comfortable with the idea of external benefits and costs and were able to explain at least one
benefit and cost of allowing the mine to open. The most successful candidates explained the
benefit of creating such a large number of jobs in a country with high unemployment but recognised
the long-term problems that pollution and congestion would cause. These candidates were often
able to make an evaluative comment. The weakest answers simply repeated the information
provided in the stem of the question without explaining whether the point would be good or bad for
the country.
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BUSINESS STUDIES
Paper 0450/12
Key messages
Information contained in the stem of each question will prove helpful in answering the questions set.
• Parts (a) and (b) of each question required the recall of knowledge or application of knowledge linked to
a given context. These parts were generally done well. More precision is needed when using business
terminology.
• Parts (c) and (d) require candidates to identify and explain points. To gain full marks each point must
be linked to the relevant context.
• Part (e) requires candidates to provide more developed explanations and a logical decision based on
points made. Candidates should develop, points, and when possible present a two-sided argument.
General comments
Candidates were generally well prepared for the examinations and most attempted every question.
Questions requiring definitions and calculations were generally well attempted. There was evidence that
candidates were unfamiliar with the precise meaning of some terms including external cost.
There was evidence that certain parts of the syllabus including concepts such as job production and break-
even proved more challenging to some candidates. It is important that candidates ensure they are answering
the question set.
At times the application and analysis marks were often awarded because some candidates did not address
the specific question asked. To do well in this paper, candidates must make clear references, or application,
to the stimulus material provided. Part (e) of all questions continues to be the most challenging for all
candidates. Stronger candidates were able to suggest and justify decisions successfully. Other candidates
provided a simple list of knowledge points. Of those who did attempt an evaluative statement, some were
unable to provide reasoned statements to back up their choice.
Question 1
(a) Most candidates understood that the tertiary sector provided services. Stronger candidates were
able to provide a precise definition.
(b) Most candidates were able to calculate the correct revenue figure.
(c) This question proved challenging for some candidates. Stronger candidates did attempt to identify
and explain how break-even information could be useful to a business and better responses were
able to use context. Some candidates described what break-even was rather than explain how it
could be used.
(d) This question proved challenging for some candidates. Stronger candidates were able to correctly
identify and explain how ways such as training and improving communication could help a
business improve customer service. The best responses made good use of the source material to
support the points being made. Some candidates misinterpreted the question and identified ways a
business could use to attract customers.
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(e) Good knowledge was evident in most responses. Better answers developed points made and used
the information from the stem to help make a justified decision about whether Flyway should only
use e-commerce. Stronger answers considered points both for and against closing the shops and
attempted to make an appropriate decision based on their argument. These candidates made good
use of the source material to support the points being made. Some candidates did attempt to make
a decision but were not always able to offer sufficient reasons to back up the statement made.
Question 2
(a) Most candidates could identify one advantage of specialisation but some candidates repeated
similar points for both answers.
(b) Many candidates understood that external costs were costs paid for by a third party. Some
candidates were able to give a precise definition. A common mistake was to identify examples,
which did not explain the term.
(c) This question was generally well answered. Most candidates could correctly identify possible ways.
Many candidates did well as they were able to explain how methods such as ‘recycling’ or ‘using
environmentally friendly materials could be introduced into a shoe making business.
(d) Many candidates were able to correctly identify an advantage or disadvantage. Stronger
candidates did attempt to explain how or why points such as meeting individual customer
requirements could be an advantage while slow production could be a disadvantage for a business.
Stronger responses were linked to the scenario. A number of candidates did not make a clear
distinction between job production with other production methods so identified points that were
more appropriate to flow production or production methods in general. Some candidates
misinterpreted the question
(e) Most candidates showed good knowledge of issues, and were able to apply their answer to the
scenario. Better answers understood that as the business operated in a niche market making high
quality shoes, these were important factors to be considered in any decision. Better answers
offered a supported decision. Weaker answers identified points but did not develop them to show
why or how they were important.
Question 3
(a) Most candidates were able to identify at least one element with objectives being a typical choice.
(b) Most candidates knew non-current assets were owned by the business. Better candidates were
able to provide a precise definition. A number of candidates provided examples rather than a
definition.
(c) Generally well answered. Most candidates could calculate the current ratio. For the second part,
most candidates understood that the results showed an improvement between the two years.
Better answers were able to clearly explain what the improvement signified.
(d) Most candidates could identify at least one problem. Better responses were able to suggest
suitable solutions and attempted to link them to the scenario.
(e) To score highly on this question the candidates needed to discuss whether Yanis should change
from using high wage rates to motivate his employees. Most candidates were able to identify
alternative methods with better answers linking their answer to the restaurant scenario. Better
responses were able to develop points made to explain how or why such points were significant.
Question 4
(a) Many candidates were able to identify one reason with more businesses entering the market being
a typical response. Weaker candidates repeated the same answer for both reasons.
(b) Well answered by most candidates.
(c) Most candidates showed good knowledge of the possible effects of an increase in taxation.
However, some responses did not attempt to apply this information in the context of this business.
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(d) This question produced a mixture of responses. Many candidates could identify one advantage
with improved communication being a typical answer. Stronger candidates tried to explain how the
point identified could help a business. Better responses were able to link their answer to the
scenario. Instead of development some repeated the point rather than explain how it could benefit
the business.
(e) Most candidates showed good knowledge of communication methods. Better responses then tried
to explain why the chosen method could be a suitable method to use when informing employees
about the proposed changes. Stronger candidates were able to link their answer to the scenario.
Better answers attempted to make an appropriate conclusion based on the points made. Weaker
answers made simple statements such as cheaper or faster without explaining how or why this
might be the case for the method selected.
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BUSINESS STUDIES
Paper 0450/13
Key messages
Candidates should be reminded that they must carefully read questions to identify both the type of business
and whom they are writing their response about. Information contained in the stem of each question will
prove helpful in answering the questions set.
• Parts (a) and (b) of each question required the recall of knowledge or application of knowledge linked to
a given context. These parts were generally done well. More precision is needed when using business
terminology.
• Parts (c) and (d) require candidates to identify and explain points. To gain full marks each point must be
clearly developed and linked to the relevant context.
• Part (e) requires candidates to provide more developed explanations and a logical decision based on
points made. Candidates should be encouraged to develop, rather than simply list a number of points,
and when possible, a two-sided argument.
General comments
Candidates were generally well prepared for the examinations and most attempted every question.
Questions requiring definitions and calculations were generally well attempted. There was evidence that
candidates were unclear on the precise meaning of some terms including marketing strategy.
There was evidence that some candidates did not fully understand certain parts of the syllabus including
concepts such as competitive pricing and ethics.
At times the answer given did not constitute an explanation of point identified but was simply another
knowledge mark or a repetition of the initial point. Some candidates had the wrong focus so did not address
the specific question asked. To do well in this paper candidates must make clear references, or application,
to the stimulus material provided. Candidates should also avoid using the same application and analysis
point more than once in any given answer.
Part (e) of all questions continues to be the most challenging for all candidates. Only the best candidates
were able to suggest and justify decisions successfully. Other candidates often provided a simple list of
knowledge points. Of those who did attempt an evaluative statement, many were unable to provide reasoned
statements to back up their choice.
Question 1
(a) Most candidates understood that the quality assurance involved checking products. Better
candidates were able to provide a precise definition. Some candidates confused the term with
quality control. Others explained why it was used rather than what it was.
(b) Most candidates were able to calculate the correct answer.
(c) Most candidates were able to identify at least one way with import tariffs being a typical response.
Only the best responses were able to use to context. A common mistake was to repeat the same
application for both answers.
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(d) This question proved challenging to some candidates. Many candidates were able to identify either
an advantage or disadvantage. Better answers explained how points such as flexibility could be an
advantage while the need to reset machines between each batch could create problems. Only the
strongest responses used the information provided to apply their answers. A number of candidates
appeared to confuse batch production with other production methods so identified points that were
more appropriate to flow production or production methods in general. Such answers could not be
awarded.  
(e) Good knowledge was evident in most responses. Better answers made good use of the data to
help them support points made. The best answers considered points both for and against closing
each factory and attempted to make an appropriate decision based on their argument. Evaluation
in many responses was simple or not attempted.
Question 2
(a) This term was not well understood by a number of candidates and many provided an imprecise
definition. Some were aware that a marketing strategy was either a plan based on combining
elements of the marketing mix or it was used to help achieve marketing objectives. Only the best
responses were able to show clear understanding of the term.
(b) Most candidates could correctly identify at least one reason. Typical responses were to motivate
employees or to have targets or goals to work towards.  
(c) This question produced a range of responses. Many candidates could correctly identify one way.
Better responses were able to link their answer to the context. A common mistake was to identify
issues that are required by law, rather than ethical aspects.
(d) The impact of competitive pricing was not well understood by many candidates. Better answers
were able to correctly identify and explain an advantage or disadvantage of using this pricing
method. The best answers were also able to explain the point in context. A common error was to
define the term, rather than explain how it would help a business. A number of candidates
confused the term with penetration pricing.
(e) This question clearly differentiated between candidates. The strongest responses used the data
well to support points made recognising that despite the fall in revenue, product A still represented
51 per cent of its revenue and used the information to make an appropriate decision. Instead of
development, many candidates identified additional knowledge points, which could not be awarded
as there was only one mark available for knowledge. Few candidates gained marks for evaluation
on this question.
Question 3
(a) This question produced a mixture of responses. Many candidates knew that a business plan
included aims or objectives. Some candidates were able to give a precise definition. A number of
responses provided examples of possible objectives rather than elements of a business plan.
Others confused the term with a budget or cash flow forecast.  
(b) Well answered by most candidates.
(c) Generally well answered. The common mistake was not to show the values for Y and Z as negative
numbers.
(d) Most candidates were aware of the advantages and disadvantages of a business partnership.
Better answers used the information provided to apply their answer. Not many candidates gained
the analysis marks on this question, as candidates often repeated the knowledge point rather than
explain the impact of points.
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(e) Sources of finance were an area of the syllabus that candidates understood with most candidates
showing good knowledge of appropriate options. Better candidates used the information provided
to calculate the relative cost of each option, and then attempted to use this analysis to support their
chosen option. Instead of development some candidates identified a range of alternative methods,
but no development. A number of weak responses incorrectly assumed that cash and profit are the
same.
Question 4
(a) Most candidates understood that a multinational company operated in a number of countries.
Better candidates were able to provide a precise definition. A common error was to confuse the
term with an exporter.
(b) Many candidates understood that gross domestic product would increase during an economic  
boom. Some candidates were able to provide a precise definition.
(c) Most candidates could correctly identify two methods. However few responses attempted to apply
this information in the context of this business so credit for application was therefore rarely given.
(d) Many candidates understood the role of a person specification and job advertisement. Better
candidates were able to apply their knowledge to the context. Only the best responses were able to
provide clear explanations as to how they helped a business in the recruitment process.
(e) This question produced a range of responses. Good knowledge of the various training methods
was evident in most answers. Many candidates were able to link their answers to the scenario.
Stronger answers used the context well to support points made. For example many recognised that
as the current employees were highly skilled they may be capable of providing on-the-job training.
Weaker responses offered simple statements such as access to skilled trainers but no
development. Evaluation in most responses was simple or not attempted.
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BUSINESS STUDIES
Paper 0450/21
Case Study
Key messages
Candidates should be reminded that throughout this paper they are expected to apply their business
knowledge and understanding to an unseen case study or business scenario. This will ensure responses are
appropriate for each given situation.
• To do well in this paper, candidates must make clear reference, or application, to the accompanying
case. Specific marks are allocated throughout the mark scheme in both parts (a) and (b) for application.
In this particular case study, candidates were expected to refer to an animal care business which offers
a range of services to busy animal owners.
• Candidates should try to give a full explanation of positive and negative consequences of a business
decision. Responses require developed reasoning rather than simple description; listed points generally
only gain Level 1 whereas an explanation of a point could move the answer to Level 2.
• Several questions on this paper ask candidates to make a justified recommendation. It is important to
offer a decision based on balanced argument. The recommendation should compare and make
reference as to why the alternative options were rejected as well as justifying the option that was
chosen, without full repetition of the previous analysis.
General comments
Candidates had generally been well prepared for this examination. The context of AH offering grooming,
exercising and accommodation for animals provided an accessible scenario for candidates. Those who
applied their skills to the context of AH boosted their marks much further.
The layout of the examination paper provides side headings in the response areas to prompt candidates in
their answers. This seems to work well. Candidates must be reminded to take careful note of how many
marks are awarded for each question so they are clear about the extent of developed detail that is required
for each answer. The majority of candidates showed good knowledge and understanding of the full range of
the syllabus that was assessed, but in a handful of cases it was clear that some topics were not well
understood. Candidates should ensure they are prepared to respond to questions on the whole syllabus.
They could earn marks by defining business terms and using them confidently.
There continues to be a weakness among some candidates in handling numerical data. Examination
preparation should include some learning of how to calculate financial ratios so that valuable marks can be
gained from demonstrating good numeracy skills.
Candidates should be reminded to contextualise their responses and not provide generic textbook answers.
They must be able to utilise the information provided in the case study and use it in their responses if they
are to access the highest marks. For example, in Question 3(a) the question asked candidates to identify
and explain two possible ethical issues that AH should consider. Information was presented in the case study
which highlighted the fact that AH employed children under the age of 12 and paid them below the minimum
wage. There was also mention of rare animals being kept as pets in small cages which had attracted
negative comment on social media. These were ideal points to discuss in the answer to this question.
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Question 1
(a) Many candidates made a good start by demonstrating sound knowledge of the ways in which the
size of AH can be measured. Capital employed and the number of employees were frequently
mentioned. Fewer candidates were able to adequately explain the limitations of these measures by
discussing the measuring of capital versus labour intensive businesses and those with many part-
time workers which could make the business appear much larger than it actually was.
(b) This question was answered well by many candidates. Good responses gave detailed explanation
of focus groups, questionnaires and government data. The suitability of each method was
discussed with both advantages and disadvantages considered. Weaker responses tended to offer
generic methods such as primary and secondary research without developing the analysis of how
specific data collection would help Elsie in her plan to choose a new location. The highest marks
were rewarded to candidates who made a clear justified recommendation about which would be
the best method to choose, supporting their decision by making reference to the context of animal
owners and their expectations of increased and improved animal care services.
Question 2
(a) (i) Many answers demonstrated a growing competence and confidence in handling numerical data.
Accurate calculations showing clear working scored maximum marks.
(ii) Only one way of increasing profit was required to be explained here. Credit was given for either
discussing increasing revenue or decreasing costs. The best answers linked to information given in
the case study. Some mentioned increasing the price of an overnight stay for an animal as a way of
increasing revenue, whilst others pointed out that finding a cheaper wholesaler to obtain shampoo
and brushes would reduce costs.
(b) In this question candidates were asked to consider three financial documents that AH might use to
inform the decision to move to a new site. Many candidates found this quite challenging.
Knowledge of financial reporting is generally weak. However, some stronger answers considered
the usefulness of these documents in identifying liquidity problems or the availability of retained
profit as factors which would affect the source of finance for the new site. The best answers
concluded with a judgement which balanced the significance of each document and the interest
that would be shown in them by potential investors.
Question 3
(a) Many candidates gained marks by identifying key ethical issues affecting AH. Good responses
mentioned the employment of six children under the age of 12 and the negative response on social
media of keeping rare animals in cages. Application marks could be easily gained in this question
but not all candidates made use of the case study material. However, it was apparent that many
candidates understood that such ethical issues could affect the reputation of AH and may have a
negative impact on the number of customers. AH could even face legal action if these issues are
not addressed.
(b) The purpose of this question was to ask candidates to analyse and evaluate three possible sites
for AH’s relocation. Some very detailed answers were offered which made use of the table of
information in case study. The size, cost and location of sites X, Y and Z were confidently
discussed by many candidates. Site X would offer space to service fewer animals than the
current location while site Z would be very cramped for the number of animals that could be
accommodated, leading to a poor level of service for customers. The best responses balanced the
advantages and disadvantages of each site and then gave a clear recommendation as to which
one would be most suitable and why the others would be less suitable. Unfortunately, some
answers contained a great deal of copied facts from the table in the case study and did not offer
any interpretation or analysis at all. This kind of response does not earn credit.
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Question 4
(a) Good answers were presented by many candidates. Amongst the advantages of social media that
were identified, many mentioned that it was as an inexpensive method of advertising which would
be easy to update. However, some answers mistakenly mentioned it would be seen around the
world which would not be appropriate for a small service business such as AH. There was a clear
understanding that not all customers would have access to social media and that negative
comments could quickly damage the reputation of AH. The best answers used the specific context
of AH and thus earned valuable application marks.
(b) This question was answered well. However, a few candidates misread the question and offered
discussion of the disadvantages of internal and external recruitment which was not required. Those
responses which included developed reasoning of the advantages of recruitment methods showed
sound knowledge of the topic and many pointed out that internal recruitment would provide
motivation for the existing workers whilst external recruitment would introduce new ideas about
animal care into the business and could help Elsie with her expansion plans. The best answers
made clear recommendations about which method of recruitment would be most suitable for AH to
use in this particular context, thus showing good application to the case study.
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BUSINESS STUDIES
Paper 0450/22
Case Study
Key messages
case study. Specific marks are allocated throughout the mark scheme in both parts (a) and (b) for
application. In this particular case study, candidates were expected to refer to a partnership between
two brothers who grow plants and trees as part of their garden supplies business.
decision when this is asked. Responses require developed reasoning rather than simple description;
listed points generally only gain Level 1 whereas an explanation of a point could move the answer to
Level 2.
• Several questions on this paper ask candidates to make a justified recommendation. Candidates should
be reminded that it is important to offer a decision based on balanced argument. The recommendation
should compare and make reference as to why the other alternative options were rejected as well as
justifying the option that was chosen, without full repetition of the previous analysis.
General comments
Candidates had generally been well prepared for this examination The context of GS, a gardening supplies
business, provided an accessible scenario for candidates. Those who applied their skills to the context of GS
boosted their marks much further.
their responses. This seems to work well. Candidates must be reminded to take careful note of how many
the syllabus that was assessed, but in a handful of cases it was clear that some topics, such as added value,
problems of holding high levels of inventory and how to calculate profit and the profit margins were not well
understood by weaker candidates. Candidates should ensure they are prepared to respond to questions on
the whole syllabus, as they could earn basic marks by defining business terms and using them confidently.
Candidates should be reminded to contextualise their responses and not provide generic textbook answers.
They must be able to utilise the information provided in the case study and use it in their responses if they
are to access the highest marks. For example, in Question 1(b) many candidates mentioned that two
brothers were making the decision. Stronger responses considered that GS only made $5000 profit in its first
year of trading and this was not enough to pay for the $10 000 required for the new gardening equipment.
Stronger answers also referred to the fact that the gardening equipment was to make the gardening services,
such as cutting the grass, more efficient and therefore make it easier to repay the bank loan.
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Question 1
(a) Candidates were familiar with partnerships as a type of business organisation. The majority of
responses contained an explanation of why the point made was an advantage or disadvantage for
the business, such as more than one person investing capital into the business resulted in more
capital being available to the business for expansion. However, limited liability meant that if the
business was to go bankrupt then their personal belongings would need to be sold to cover the
business debts. Where full marks were not awarded it was because the answers given were
generic and not applied to the business in the case. If answers has referred to this being a new
business, set up by two brothers each investing $5000 each for the growing of plants and trees
then the answers would be clearly in the context of this business and the marks achieved would
have been higher.
(b) Stronger responses showed a clear understanding of the three sources of finance and their
advantages and disadvantages. However, of the three sources, leasing was the least well
understood with some answers referring to GS leasing out their equipment. The most common
answers were that for a bank loan it could be repaid over time by instalments but that interest
would be added making it more expensive. Leasing would allow the gardening equipment to be
available straight away without having to acquire the full payment but that it did not belong to the
business and the full payment of the lease would be higher than the purchase price. Retained profit
meant no interest was paid and this made it the cheapest source of finance but as a new business
it may not have sufficient profit to be retained to cover the cost of the equipment. Stronger
candidates ended with a justified recommendation of which source was the better one to choose.
Answers that did not justify why the alternatives sources were rejected scored less well. Application
was most often achieved by the answer making reference to the business being new and only
having made $5000 profit. This was a lot short of the $10 000 required to purchase gardening
equipment.
Question 2
(a) Many answers identified that added value could be increased by increasing price or reducing input
costs such as the cost of the seeds or plants. These answers often made good use of the case
material to include points such as the hotels valued the quality service provided and therefore were
less price sensitive if the prices were increased and plants, trees, seeds or fertilizer could be
purchased from cheaper suppliers. These answers scored well. Some candidates outlined how the
business could add value for example by increasing the quality of the pots for the plants but then
did not link this to being able to increase price, hence not achieving the full marks available. Also
quite a number of answers confused added value with profit and therefore talked about lowering
prices to increase sales or increasing advertising to increase sales, or lowering fixed costs to
increase profit.
(b) Pricing strategies were well understood by the majority of candidates. However, weaker candidates
did not go much further than defining the strategy rather than explaining their advantages and
disadvantages. This restricted marks to lower levels and lower marks. Stronger responses
explained these advantages and disadvantages such as cost-plus is easy to apply but it might
result in an uncompetitive price being charged resulting in lost sales. Answers tended to be generic
and could not be identified as applying to this business in the case. Those that did apply their
answers referred to the brothers making decisions about the pricing strategy, the business being
new and needing to get established, comparing the prices charged by competitors listed in
appendix 2 or that GS has a high level of inventory and promotional pricing may be suitable as a
way of reducing it. As plants and trees were in the question application could not be achieved for
making reference to the product. Recommendations did often contain some justification of why the
alternative strategies were rejected as less suitable for this business but didn’t always do much
more than repeat earlier points when justifying the chosen strategy. Common errors were to
confuse promotional pricing with promotional techniques such as BOGOF and free gifts.
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Question 3
(a) Many responses correctly identified four characteristics the partners would require for an
employee. Most popular answers were experience in gardening so that they would maintain a good
quality service for the hotels, being hard working so they would be efficient, good communicators
so that hotel staff would find the employees pleasant and maintain a good reputation for GS and
honest, trustworthy or punctual as being personal qualities required for employees. Many answers
scored well but those that didn’t confused the person specification with a job description and talked
about the work itself and the pay and hours worked. A few candidates thought the question was
about finding a new partner and so answered incorrectly.
(b) Many responses correctly explained the advantages and disadvantages of each of the sites and
then went on to give a basic recommendation of which site to choose. Weaker answers just
repeated the information provided in the case without any comment such as site X has good fertile
land without any comment that this might make the growing of plants more effective and therefore
lead to lower costs to grow each plant. The majority of answers gained application marks as they
made good use of the information provided in the case. Only strong answers contained
recommendations that went on to fully justify the site chosen and go further than repeating the
earlier analysis in justifying the choice of site and rejecting the alternative sites. Site Y was chosen
by the majority of candidates although site X and Z had their merits and were justified by many
candidates as suitable sites to choose.
Question 4
(a) The majority of responses showed knowledge of the problems of holding a high level of inventory
with points such as it raised costs of maintaining this inventory given the nature of the product
being plants and that if not maintained they die. Paying for additional warehouse space or paying
wages to tend the trees and plants all resulted in higher costs and possibly lower profit for GS.
Some answers also considered the liquidity position of the business and given the desire of the
brothers to expand the business it might make it more difficult. Answers were often applied to this
business and there were few totally generic correct answers. Common errors by weaker
candidates were to explain why the inventories had become so high or how the problem of high
inventories could be solved.
(b) Many answers contained at least the profit figure of $5000 being calculated and hence the answer
moved into level 2. However, many answers did not achieve many more marks as they were
generic and did not make use of any of the other information in the case to make a judgement
about the success of this business. Stronger candidates included the calculations of gross profit
margin (83 per cent) and profit margin (8 per cent) with simple judgements made between these
and other similar garden businesses. Some also went on to make judgements as to why the figures
for GS were less favourable than the other similar businesses. Strong answers recognised that this
was a new business only set up the previous year and therefore comparisons with similar
businesses was probably too early to make any firm judgements as to whether this business was
going to be more or less successful than these similar gardening businesses.
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BUSINESS STUDIES
Paper 0450/23
Case Study
Key messages
case study. Specific marks are allocated throughout the mark scheme in both parts (a) and (b) for
application. In this particular case study, candidates were expected to refer to a children’s nursery.
decision when this is asked. Responses require developed reasoning rather than simple description.;
• Several questions on this paper ask candidates to make a justified recommendation. Candidates should
be reminded that it is important to offer a decision based on balanced argument. The recommendation
should compare and make reference as to why the other alternative options were rejected as well as
justifying the option that was chosen, without full repetition of the previous analysis.
General comments
Candidates had generally been well prepared for this examination. The context of the Belle family owning
and running a children’s nursery provided an accessible scenario for the majority of candidates. No question
appeared to be too challenging for more than a few candidates.
their responses. This seems to work well. Candidates must be reminded to take careful note of how many
the syllabus that was assessed, but in a handful of cases it was clear that some topics were not well
understood and these were chain of command, span of control, how to draw a break-even chart and ways to
reduce the break-even level of output. Candidates should ensure they are prepared to respond to questions
on the whole syllabus, as they could earn marks by defining business terms and using them confidently.
Candidates should be reminded to contextualise their responses and not provide generic textbook
responses. They must be able to utilise the information provided in the case study and use it in their
responses if they are to access the highest marks. For example, in Question 4(b) a number of candidates
made statements such as they will have fewer customers. Better responses explained why they would have
fewer customers, how this would affect the nursery and then gave a clear justification as to which of these
external influences would have the greatest effect on the profit of the nursery. The strongest candidates also
justified why the other two changes would have less effect on the company’s profit.
Question 1
(a) Many candidates made a good start to the examination by correctly identifying an advantage and a
disadvantage of private limited companies. Popular answers included limited liability and being
restricted to who can buy shares. Candidates were often able to gain application marks for this
question by referring to the business being a children’s nursery and being set up 10 years ago.
However, most candidates were only able to gain a maximum of two application marks because
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the response did not contain sufficient application for full marks. Weaker candidates confused this
with a business owned by the government.
(b) Many candidates showed a good understanding of the advantages and disadvantages of each of
these research methods, such as government statistics are cheap to collect and are accurate but
may be out of date. Whilst research about competitors using the internet may be quick but may not
reveal much information about the size of the market as only information about the services offered
and prices these businesses charge may be on the websites. Interviews with parents will gather
qualitative data but will be time consuming and expensive to collect. Better answers focused on
carefully using the context to support their reasoning such as finding out how many and what ages
of children there were in an area. To gain level 3 marks, candidates needed to go beyond repeating
their Level 2 comments and draw comparisons with the rejected alternatives such as whilst
government statistics are cheap to collect they will not gather qualitative data and so the size of the
market for this after school service may not be established. Quantitative data about the number of
children in an area might be useful but it will not provide the information about whether there is a
demand for this service.
Question 2
(a) The majority of candidates answered this question well and discussed the leadership styles of
autocratic and democratic with Laissez-faire being the least popular style. However, weaker
candidates mixed up the explanation of the leadership style, for example they explained autocratic
under the heading of democratic. A minority of candidates did not seem to be aware of the different
leadership styles.
(b) The answers to this question often scored very well. Most candidates made effective use of the
insert material and earned Level 2 credit by analysing the advantages and disadvantages of each
of the options. Many responses correctly explained the advantages and disadvantages of each
option and then went on to give a basic recommendation of which option to choose moving the
answer into Level 3. Weaker answers just repeated the information provided in the case without
any comment, such as option 1 has a reputation for being badly managed but $5000 will be
needed to provide better equipment. The majority of answers gained application marks as they
made good use of the information provided in the case. Only strong answers contained
recommendations that went on to fully justify the option chosen and go further than repeating the
earlier analysis in justifying the choice of option and justifying why the alternative option was less
suitable.
Question 3
(a) There were many candidates that could not clearly explain the difference between chain of
command and span of control. Those that could do this often used Appendix 2 to support their
explanation, as instructed to do by the question. Weaker candidates just described what the
organisation chart showed without any attempt to relate this to chain of command or span of
control. Better candidates identified that there was a chain of command of three layers and also a
span of control for Stella of three supervisors and then explained this further, such as a span of
control of only three is narrow and allows Stella to have close contact and good communication
with these supervisors. Answers to chain of command often gained more marks than span of
control which seemed to be the less well understood of the two terms.
(b)(i),(ii) This question allowed many candidates to access high marks on part (i) as they could correctly
draw on the total cost and total revenue lines and identify the break-even output. For part (ii) whilst
many candidates scored some marks by suggesting price increases and cost reductions as
suitable ways to reduce the break-even output many focused their explanation on profit rather than
the impact on the break-even output and hence limited their access to higher marks.
Question 4
(a) The majority of candidates answered this question well. However, a common error was to identify
that profit was needed to pay expenses. Application marks were often gained when candidates
considered that profit was needed to help finance the expansion of this business. Providing funds
for unexpected events or the reward for shareholders taking the risk of investing in the nursery
were other common correct responses. Where full marks were not achieved it tended to be for
providing a generic answer and not applying it to this case.
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(b) There were many good answers to this question and candidates were able to analyse the effect of
these changes on the nursery business. However, a common mistake was to think that lowering
income tax meant BB paid less tax on profits rather than consider the effect on its customers. The
majority of answers were applied to the case, for example many candidates considered the effect
of BB opting for either option 1 or option 2 and expanding the business into a high or low-income
area. The majority of answers gained at least Level 2 and many went on to gain lower Level 3
marks. Stronger candidates included a recommendation that clearly justified which change they
thought would have the biggest effect on the profit of the nursery and why it would have a bigger
effect than the other two changes. The opening of government run free nurseries was thought to
have the greatest effect by the majority of candidates.
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MOCK EXAMS

BUSINESS STUDIES 0450/11

Paper 1 October/November 2017

Candidates answer on the Question Paper.

No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Answer all questions.

This document consists of 9 printed pages and 3 blank pages.

Table 1: Information on possible promotion options for Ella’s bicycle light.

Option 1: Set up her own website Option 2: Advertise in specialist

(a) Identify two characteristics of a successful entrepreneur.

© UCLES 2017 11_0450_11_2017_1.8

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January February March

Cash inflow 560 520 600

Other costs 500 480 520

Total cash outflows 560 540 595

Net cash flow 0 (20) Y

Opening balance 5 W (15)

Closing balance 5 (15) Z

(a) What is meant by ‘productivity’?

© UCLES 2017 11_0450_11_2017_1.8

© UCLES 2017 11_0450_11_2017_1.8 [Turn over

(a) What is meant by ‘economies of scale’?

(b) What is meant by ‘autocratic leadership style’?

© UCLES 2017 11_0450_11_2017_1.8

© UCLES 2017 11_0450_11_2017_1.8 [Turn over

Table 3: Information about the proposed coal mine

Planned output 50m tonnes per year

Number of years coal mine will operate 60 years

Jobs created 10 000

Level of waste products causing pollution High

Risk of traffic problems High

(a) What is meant by a ‘stakeholder group’?

© UCLES 2017 11_0450_11_2017_1.8

© UCLES 2017 11_0450_11_2017_1.8

BUSINESS STUDIES 0450/12

Paper 1 October/November 2017

Candidates answer on the Question Paper.

READ THESE INSTRUCTIONS FIRST

Answer all questions.

This document consists of 9 printed pages and 3 blank pages.

Table 1: Selected information about two of FlyAway’s routes

Route Average number of Average price per ticket Break-even number of

(a) What is meant by ‘tertiary sector’?

(b) Calculate the revenue gained from an average flight on route 2.

© UCLES 2017 11_0450_12_2017_1.8

© UCLES 2017 11_0450_12_2017_1.8 [Turn over

(a) Identify two advantages of specialisation.

(b) What is meant by ‘external cost’?

© UCLES 2017 11_0450_12_2017_1.8

© UCLES 2017 11_0450_12_2017_1.8 [Turn over

Table 2: Extract from balance sheet as at 30 September 2017 ($ 000)

Non-current assets 160

Non-current liabilities 120

Part 2:................................................................................................................................ [2]

(b) What is meant by ‘non-current assets’?

(c) (i) Calculate the current ratio as at 30 September 2017.

© UCLES 2017 11_0450_12_2017_1.8

Explanation of how to overcome the problem:..................................................................